Fidelity and Cas. Co. of New York v. Philadelphia Resins Corp., 83-1362

• Decision Date: 02 July 1985
• Docket Number: No. 83-1362,83-1362
• Citation: 766 F.2d 440
• Parties: FIDELITY AND CASUALTY CO. OF NEW YORK, Plaintiff/Appellee, v. PHILADELPHIA RESINS CORPORATION, Defendant/Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 440

766 F.2d 440

FIDELITY AND CASUALTY CO. OF NEW YORK, Plaintiff/Appellee, v. PHILADELPHIA RESINS CORPORATION, Defendant/Appellant.

No. 83-1362.

United States Court of Appeals, Tenth Circuit.

July 2, 1985.

William H. ReMine, III of Montgomery Little Young Campbell & McGrew, P.C., Englewood, Colo., for plaintiff/appellee.

Karen J. McClurg, Kipp & Christian, P.C., Salt Lake City, Utah (D. Gary Christian and Teresa L. Sturm, Salt Lake City, Utah, on brief), for defendant/appellant.

Before BARRETT and SEYMOUR, Circuit Judges, and KANE, ^* District Judge.

BARRETT, Circuit Judge.

Philadelphia Resins Corporation (PRC), a Pennsylvania Corporation, and one of two defendants in the district court, appeals from judgment for the plaintiff, Fidelity and Casualty Company of New York. Plaintiff's insured was a French geophysical exploration company, Compagnie Generale de Geophysique (CGG).

This was a tort action which arose from an accident in a mountainous area north of Salina, Utah, on February 11, 1978. CGG had been conducting seismic operations in the area, and had contracted with Randall Rogers, a helicopter pilot from Pea Ridge, Arkansas, to fly CGG's seismic equipment and personnel to and from testing sites in the field. Prior to leaving for Utah to perform his transportation contract with CGG, Rogers contacted PRC by telephone and ordered three "Phillystran" synthetic fiber cables for use in suspending loads from the helicopter. Rogers had contacted PRC after reading an advertisement for the cables in "Aerial Applicator" magazine, a trade publication. R. Vol. IV, p. 125. Rogers told the PRC employee that he planned to use the cable in the Rocky Mountain region, although he did not know at the time what particular state he would be taking the cable to. R. Vol. IV, p. 134. PRC shipped the cables to Rogers' address in Arkansas, and Rogers brought them to Utah for use in performing his contract with CGG. On February 11, 1978, Rogers was lifting equipment belonging to CGG with his helicopter when the "Phillystran" cable snapped and the load fell to the ground, resulting in approximately $120,000 in damage to the equipment.

On January 15, 1980, CGG commenced this lawsuit, naming Rogers and PRC as defendants, alleging sale by PRC of a defective product and negligence on the part of both PRC and Rogers. PRC made a special appearance to contest the court's jurisdiction, but the court disagreed with PRC's position, deciding the question in favor of the plaintiff. After substitution of the insurance company as the named plaintiff, the cause was tried to a jury. The jury returned a special verdict, finding that Rogers was not negligent, that CGG was 12% negligent, and that PRC was 88% negligent. The jury further found that PRC had sold a defective product unreasonably dangerous to the user. Judgment was rendered accordingly, and PRC now appeals, raising three distinct issues for our review. However, we will consider only the first issue raised by PRC, that being whether or not the Utah district court had in personam jurisdiction over the Pennsylvania corporation. Because we find that in personam jurisdiction over PRC was lacking, we will dismiss without consideration of the other issues of substantive law.

The question whether a federal court has in personam jurisdiction over a nonresident defendant in diversity cases is determined by the law of the forum state. Yarbrough v. Elmer Bunker & Associates, 669 F.2d 614 (10th Cir.1982). In applying this rule, the district court exercised in personam jurisdiction over PRC in accordance with Utah's "long arm" statute, which provides that a nonresident submits himself to the jurisdiction of the Utah courts on any claim arising from "The causing of injury within this state whether tortious or by breach of warranty." Utah Code Ann. Sec. 78-27-24 (Supp.1983). ¹ The statute, on its face, applies to PRC, and because the Utah legislature has specifically directed that the statute "should be applied so as to assert jurisdiction over nonresident defendants to the fullest extent permitted by the due process clause of the Fourteenth Amendment to the United States Constitution," Utah Code Ann. Sec. 78-27-22 (Supp.1977), the "minimum contacts" doctrine of International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945) becomes critical. Our inquiry is thus reduced to a single question: Does PRC have sufficient "minimum contacts" with the State of Utah to support the exercise of in personam jurisdiction?

Before examining the law of "minimum contacts" and applying that law to the facts of this case, we will review the evidence presented in the district court concerning PRC's contacts with the State of Utah. We note in this regard that the burden of establishing in personam jurisdiction over the defendant is on the plaintiff. Yarbrough v. Elmer Bunker & Associates, supra. PRC is in the business of manufacturing and selling a variety of epoxy resin compounds, ² as well as a variety of tower guys, ropes, and cables. PRC sells some 10-15% of its products in Pennsylvania, and has sold its products in all fifty states, although it has never sold "Phillystran" cables (the product used by Rogers) to customers in Utah. R.Vol. I, pp. 48, 51. From 1978 through 1980, PRC made sales of its other products to a total of ten customers in Utah, amounting to less than one-tenth of one percent of PRC's gross sales. R.Vol. I, pp. 63-64. PRC's epoxy resin products are sold through a network of distributors, but its "Phillystran" cables are sold directly to consumers with no distributorship network. R.Vol. I, p. 47. PRC advertises in trade publications targeted at specific professions or industries, which presumably have a national circulation, although, as PRC stated in answer to an interrogatory, "There is no way of determining where advertising ultimately ends up. Publications may well be disseminated worldwide." R.Vol. I, p. 52. There is no evidence that PRC advertises by any method specifically directed at the Utah market, nor is there any evidence that PRC employs any personnel in Utah. The sum total, then, of PRC's contacts in Utah are: (1) a miniscule number of sales of products other than "Phillystran" cable, (2) advertising in a national trade magazine that presumably reaches Utah, and (3) the failure of one of its defective "Phillystran" cables in Utah after the cable was taken there by one of its customers.

The leading case on the "minimum contacts" doctrine is International Shoe Co. v. State of Washington, supra. In that case, the State of Washington had asserted in personam jurisdiction over the International Shoe company for the purpose of assessing mandatory contributions to the State's unemployment compensation fund. The company was a Delaware corporation with its principal place of business in St. Louis, Missouri. It argued that the exercise of in personam jurisdiction was improper in that the company had no office in Washington, stocked no merchandise there, had no agent for service of process in the State, and made no contracts for the sale or purchase of merchandise there. The company did, however, employ some eleven to thirteen salesmen in the state, who exhibited samples of merchandise and solicited orders from prospective buyers. The result of these salesmen's efforts was a substantial volume of merchandise shipped into the State from St. Louis. The Court began its analysis by stating that the traditional, strictly territorial notion of in personam jurisdiction expressed in Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565 (1877) had given way to a more flexible standard:

[D]ue process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend "traditional notions of fair play and substantial justice." (Citations omitted.) 326 U.S. at 316, 66 S.Ct. at 158.

The Court was not specific on just what kinds of "minimum contacts" would suffice:

It is evident that the criteria by which we mark the boundary line between those activities which justify the subjection of a corporation to suit, and those which do not, cannot be simply mechanical or quantitative. The test is not merely, as has sometimes been suggested, whether the activity, which the corporation has seen fit to procure through its agents in another state, is a little more or a little less.... Whether due process is satisfied must depend rather upon the quality and nature of the activity in relation to the fair and orderly administration of laws which it was the purpose of the due process clause to insure. (Citations omitted.) Id. at 319, 66 S.Ct. at 159-160.

There were hints in the Court's opinion that one factor in the decision would be whether the defendant's contacts were related to the plaintiff's claim or were unrelated to it. Id. at 318, 66 S.Ct. at 159. Since the company's sales activities in this case were obviously related to the State's assessment claim, id. at 320, 66 S.Ct. at 160, the Court had no occasion to explore the point.

In Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485 (1952), the Court made it clear that in personam jurisdiction over a corporation could be supported by sufficient contacts in the forum state, even though such contacts were entirely unrelated to the plaintiff's claim. In this case, the defendant was a mining company with mines in the Phillipine Islands. When the Islands were occupied by the Japanese during World War II, the company's president moved his operations to an office in Ohio. All of the company's limited wartime activity was carried on from the Ohio office; secretaries were hired, correspondence was maintained, salary checks were drawn on local banks, etc. The activity was described by the Court as "continuous and systematic." When a disgruntled...