493 F.2d 818 (4th Cir. 1972), 71-2145, Ajax Realty Corp. v. J. F. Zook, Inc.

Docket Nº:71-2145.
Citation:493 F.2d 818
Party Name:AJAX REALTY CORPORATION, Appellant, v. J. F. ZOOK, INC., et al., Appellees.
Case Date:December 12, 1972
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit
 
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Page 818

493 F.2d 818 (4th Cir. 1972)

AJAX REALTY CORPORATION, Appellant,

v.

J. F. ZOOK, INC., et al., Appellees.

No. 71-2145.

United States Court of Appeals, Fourth Circuit.

December 12, 1972

Argued Oct. 2, 1972.

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J. Cameron Mann, Norfolk, Va. (Maurice Steingold and Steingold, Steingold & Friedman, Norfolk, Va., on brief), for appellant.

E. Preston Grissom, Norfolk, Va. (Allan S. Reynolds and White, Reynolds, Smith & Winters, Norfolk, Va., on brief), for appellees.

Before WINTER, BUTZNER, and RUSSELL, Circuit Judges.

WINTER, Circuit Judge:

Plaintiff, Ajax Realty Corporation (Ajax), appeals from the district court's decision granting the motion of defendant, Durell Products, Inc. (Durell), to dismiss and to quash service of process. The appeal raises questions concerning the interpretation and constitutionality of Virginia's Long Arm Statute. 1 Va. Code Ann. § 8-81.2 (1964). 2

Durell, a corporation of the State of Washington, manufactured unglazed window frames which C & S Sales Company, a Colorado corporation, purchased and sold to Ajax, a Virginia corporation.

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Ajax installed the frames in its apartment complex in Virginia. The frames leaked, occasioning property damage to the apartments. Ajax sued Durell and others alleging both breach of warranty and tort liability. Jurisdiction of the subject matter was based on diversity of citizenship. 28 U.S.C.A. § 1332.

With regard to the jurisdictional issue, the district court found the following facts: Durell transacts nearly all its business in the Pacific Northwest. It has never been domesticated in Virginia. Durell has never maintained any manufacturing, sales, storage, or other business facility in Virginia. It has never advertised, solicited, or contracted for any sales in Virginia. It has never directly distributed its products in Virginia. It has never maintained a distributor, jobber, agent, or other representative in Virginia.

Durell manufactured the frames in issue in Washington. It sold the frames to C & S Sales in Denver, Colorado for $37,000. C & S Sales then sold the frames to Ajax in Virginia. Durell was not involved in the sale by C & S to Ajax. C & S is not Durell's agent. At the request of C & S, Durell shipped a sample frame to Chicago to facilitate preparations for glazing. Again at the request of C & S, Durell shipped the manufactured, but unglazed, frames directly to Ajax in Virginia. After the frames leaked, Durell sent a representative to Virginia to examine them in an attempt to alleviate the problem.

I.

Ajax invokes several sections of the long arm statute. We shall discuss only §§ 8-81.2(a)(1) and 8-81.2(a)(5). 3

1. Sec. 8-81.2(a)(1) provides that a court may exercise personal jurisdiction if the claim arises from a corporation's 'transacting any business in this State.' At issue is whether § 8-81.2(a)(1) should be construed to embrace Durell's sole act of shipping the frames to Virginia. In Haynes v. James H. Carr, 4 Cir., 427 F.2d 700, 704, cert. den. 400 U.S. 942, 91 S.Ct. 238, 27 L.Ed.2d 245 (1970), we held that § (a)(1) was not a single act statute. In other words, a foreign corporation must conduct more than a single business transaction in Virginia to be subject to jurisdiction under the provisions of that statute.

However, in John G. Kolbe v. Chromodern Chair Co., 211 Va. 736, 180 S.E.2d 664, 668 (1971), the Supreme Court of Virginia, stressing the word 'any,' construed § (a)(1) as 'a single act statute requiring only one transaction in Virginia to confer jurisdiction.' The Court reasoned that: (1) 'the purpose of Virginia's long arm statute is to assert jurisdiction over non-residents who engage in some purposeful activity in this State to the extent permissible under the due process clause'; (2) since it would not offend traditional due process notions of fair play and substantial justice to subject a foreign corporation to Virginia jurisdiction where its one business transaction 'invoked the benefits and protection of the laws of' Virginia, § (a)(1) should be construed to reach such a case.

Chromodern is technically distinguishable from the instant case. The foreign corporation there had significantly stronger contacts with Virginia than did Durell: the foreign corporation there maintained a manufacturer's representative for Virginia and neighboring states, it maintained a non-stocking dealer in Virginia, it had contracted for other sales through these agents in Virginia, and the contract in question was with the Virginia non-stocking dealer. Thus, Chromodern does not compel a similar conclusion here. Moreover, the Court's construction of § (a)(1) as a single act statute must properly be

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termed dictum. Nevertheless, mindful of our obligation under Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), and its progeny to follow state interpretation of state law, we adopt the Virginia Supreme Court's construction of § (a)(1) as a single act statute. Haynes, supra, insofar as it is inconsistent, is superseded by state decisional law and should no longer be followed.

Even under the state construction of § (a)(1), however, Durell cannot be said to have transacted any business in Virginia. Durell's sole contact with Virginia was its shipment of the frames to Virginia, FOB Washington State. Durell shipped the frames to Virginia either as an accommodation to C & S or as C & S's agent for the purpose of shipment. C & S prepaid the cost of shipment. As the district court found, Durell sold the frames to C & S, a Colorado firm. It had no initial involvement in C & S's resale to Ajax in Virginia. There is no evidence that Durell knew at the time of its sale to C & S that C & S would resell the frames to a Virginia concern, or that C & S would request Durell to ship them directly to Virginia. On the other hand, since C & S's business apparently involved the resale of manufactured frames-- that is, C & S did not purchase frames for installation in its own facilities-- it is not unreasonable to assume that Durell knew that C & S would resell them somewhere.

If Durell had, as originally planned, simply shipped the frames to C & S in Colorado, Virginia could not assert jurisdiction even under a single act statute. To rule otherwise would be to hold that a manufacturer transacts business in every state in which each of its independent distributors deals. Therefore, if Virginia can assert jurisdiction here under § (a)(1), the rule of the case would be that where a non-resident manufacturer ships its products directly to the ultimate purchaser, rather than to a non-resident independent distributor, either as an accommodation to the...

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