Blue Ridge Bank v. Veribanc, Inc., 84-1619

Citation755 F.2d 371
Decision Date22 February 1985
Docket NumberNo. 84-1619,84-1619
PartiesBLUE RIDGE BANK, Appellant, v. VERIBANC, INC., Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (4th Circuit)

James W. Haskins, Martinsville, Va. (George O. Burpeau, III, Young, Haskins, Mann, Gregory & Young, Martinsville, Va., on brief), for appellant.

L. Thompson Hanes, Roanoke, Va. (George W. Wooten, Woodward, Fox, Wooten & Hart, P.C., Roanoke, Va., on brief), for appellee.

Before SPROUSE and CHAPMAN, Circuit Judges, and DUPREE, Senior United States District Judge for the Eastern District of North Carolina, sitting by designation.

CHAPMAN, Circuit Judge:

Appellant Blue Ridge Bank is a corporation domiciled and doing business in Virginia. It brought this action for defamation against Veribanc, Inc. a corporation domiciled and doing business in Massachusetts. Jurisdiction is based on diversity of citizenship. Veribanc moved to dismiss this action for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2). From the order granting dismissal Blue Ridge has appealed. We reverse.

Veribanc is a corporation which analyzes financial information gathered from the Federal Reserve Board. Banks from around the country send information to the Federal Reserve Board which releases this information three months later in the form of raw computer data. Veribanc gathers the information, analyzes it, and distributes its analysis to its customers. Veribanc's customers consist mostly of money market and cash managers.

From June 1982 to November 1983 Veribanc received 4,900 orders from around the country. Of these orders 57, or 1.16 percent of the total, originated in Virginia. Veribanc earned $2,539 from the Virginia orders, or 1.42 percent of the total dollar volume of its business. Veribanc is not qualified to do business in Virginia; has advertised only in the Banker and Tradesmen which has a circulation in New England and in the Medical/Surgeon's Economics; has not made any direct mail solicitations in Virginia; has not advertised in any publications of general circulation in Virginia; has no offices or agents in Virginia; and has not sent anyone to Virginia to solicit new clients.

Like the other banks, Blue Ridge sent its report of condition and report of income to the Federal Reserve Board. Veribanc received this information and analyzed it and determined that Blue Ridge was one of 126 banks which faced zero equity within twelve months. The Chicago Tribune Syndicate purchased this analysis for Dan Dorfman, a financial columnist based in New York City. Dorfman used the analysis to write an article which appeared in the Richmond Times-Dispatch edition of May 22, 1983, under the headline "Possible Bank Flops." The article, based on the analysis supplied by Veribanc to Dorfman, is alleged to be false in stating that the bank had a $476,000 annualized net loss and would reach zero equity within eleven months.

In the course of the negotiations between the Chicago Tribune Syndicate and Veribanc, Veribanc sent a letter to Dorfman which stated: "We are furnishing this information to you with the understanding that, if you use it as source material for an article, your treatment will be representative and evenhanded, and that you will give VERIBANC, Inc. credit, including mention of our office's city and state (Wakefield, Massachusetts)."

On the basis of the May 22, 1983 article Blue Ridge sued Veribanc for defamation. In granting Veribanc's motion to dismiss the complaint for lack of personal jurisdiction, the district court held that it could not exercise jurisdiction over Veribanc under the Virginia long-arm statute, Va.Code Sec. 8.01-328.1(A)(3) and (4), and that it was unnecessary to reach the due process issue.

The Fourth Circuit has developed a two part test to determine questions of personal jurisdiction where federal jurisdiction is based on diversity of citizenship. Hardy v. Pioneer Parachute Co., 531 F.2d 193, 195 (4th Cir.1976); Wolfe v. Richmond City Hospital Authority, 745 F.2d 904, 909 (4th Cir.1984). The courts must determine, first, if there is statutory authority for the exercise of jurisdiction under the laws of the state and, second, if the exercise of jurisdiction complies with federal constitutional standards of due process. Hardy, 531 F.2d at 195; Wolfe, 745 F.2d at 909.

Blue Ridge first asserts that the district court has personal jurisdiction over Veribanc under the long arm statute of Virginia, Va.Code Sec. 8.01-328.1(A)(3) and (4). Finding that personal jurisdiction exists under Sec. (4), we need not discuss whether jurisdiction exists under Sec. (3). Section 8.01-328.1(A)(4) states:

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:

4. Causing tortious injury in this Commonwealth by an act or omission outside this Commonwealth if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in this Commonwealth.

Thus, the exercise of jurisdiction under this statute has two requirements: (1) a tortious injury in Virginia caused by an act or omission outside of Virginia; and (2) a relationship between the defendant and the Commonwealth which exists in any one of three ways which are specified in Sec. (4). Although this statute has been extended to the utmost limits of due process, John G. Kolbe, Inc. v. Chromodern Chair Co., 211 Va. 736, 180 S.E.2d 664 (1971), for the district court to exercise personal jurisdiction over Veribanc, Blue Ridge must show that Veribanc's activity fits these specific requirements of Sec. 8.01-328.1(A)(4). The necessity of a plaintiff showing that a trial court has jurisdiction over an out-of-state defendant first through the long-arm statute itself is explained in Willis v. Semmes, Bowen & Semmes, 441 F.Supp. 1235 (E.D.Va.1977):

However, this depiction of the law's purpose was derived directly from a statement of intent by the state legislature, a legislature that particularized in the statute what it deemed the permissible outer limits for the acquisition of personal jurisdiction consistent with due process. Therefore, insistence that these particulars be satisfied even in those situations where it could plausibly be argued that a lesser standard would meet due process requirements is a course mandated by legislative judgment.

Willis, 441 F.Supp. at 1243; see also, Beaty v. M.S. Steel Co., 401 F.2d 157 (4th Cir.1968) (construing a similar Maryland statute); but see St. Clair v. Righter, 250 F.Supp. 148 (W.D.Va.1966) (criticized in Beaty, 401 F.2d at 161). Blue Ridge obviously has shown facts that meet the requirement of the first part of this subsection: an act or omission outside of Virginia by Veribanc which has allegedly caused a tortious injury to Blue Ridge in Virginia.

Similarly, Veribanc obviously has some contact and relationship with Virginia. From June 16, 1982, the date of Veribanc's incorporation, through November 30, 1983, a seventeen month period, Veribanc received fifty-seven orders for...

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