Montalbano v. Easco Hand Tools, Inc.

• Decision Date: 09 July 1985
• Docket Number: No. 1071,D,1071
• Citation: 766 F.2d 737
• Parties: Joseph MONTALBANO, Plaintiff, v. EASCO HAND TOOLS, INC., Defendant-Appellant. The Moore Company, Defendant, The Stanley Works, Nannen American Corporation and OH Industries, Defendants-Appellees, Rickles Home Centers, Defendant. ocket 85-7038.
• Court: U.S. Court of Appeals — Second Circuit

Page 737

766 F.2d 737

Joseph MONTALBANO, Plaintiff, v. EASCO HAND TOOLS, INC., Defendant-Appellant.

The Moore Company, Defendant,

The Stanley Works, Nannen American Corporation and OH

Industries, Defendants-Appellees,

Rickles Home Centers, Defendant.

No. 1071, Docket 85-7038.

United States Court of Appeals,

Second Circuit.

Argued April 17, 1985.

Decided July 9, 1985.

David S. Heller, New York City (Raymond G. Lawlor, New York City, of counsel), for appellant.

C. Raymond Nelson, New York City (Finley, Kumble, Wagner, Heine, Underberg, Manley & Casey, New York City, Avrom E. Greenberg, of counsel), for appellee.

Before OAKES, MESKILL and PIERCE, Circuit Judges.

OAKES, Circuit Judge:

This is a products liability case on appeal taken under Fed.R.Civ.P. 54(b) from an interlocutory order of the United States District Court for the Eastern District of New York, I. Leo Glasser, Judge, dismissing defendants OH Industries ("OH"), a Japanese manufacturer of forgings for striking tool (sledge hammers, mauls) heads, and Nannen American Manufacturing Corporation (Nannen), a Pennsylvania distributor of such forgings. OH was dismissed because it had never been properly served with process, and Nannen was dismissed because it lacked the minimum forum-state contacts necessary to sustain in personam jurisdiction under New York law or federal constitutional law. We affirm the dismissal of OH; we reverse and remand for further findings in respect to the dismissal of Nannen.

The action was brought by plaintiff Joseph Montalbano to recover damages for personal injuries allegedly sustained on or about November 3, 1981, while using a sledge hammer in combination with a wood-splitting maul. The suit alleges negligence, breach of warranty and strict liability on the part of the original defendants Easco Tool, Inc. ("Easco"), and The Moore Company ("Moore"), an affiliate of Easco, which were alleged to be the manufacturers of the sledge hammer. Easco and Moore filed third-party complaints to implead OH Industries ("OH"), the alleged manufacturer of the sledge head; Nannen, the alleged distributor of the sledge head; The Stanley Works ("Stanley"), also a distributor of striking tools and the alleged manufacturer of the wood-splitting maul; and Rickles Home Centers ("Rickles"), the alleged New York vendor of the sledge hammer. Eventually, the plaintiff amended his complaint to assert direct claims against the four third-party defendants, and all of the defendants have asserted cross-claims against each other.

Pursuant to Fed.R.Civ.P. 4(c)(2)(C)(ii) and (d)(3) ¹, Easco attempted to serve process upon OH by mailing a copy of the summons and complaint to Nannen, which was assumed by Easco to be OH's agent. Responding to Easco's third-party complaint, as well as to Montalbano's amended direct complaint and the cross-claims of the other defendants, OH and Nannen pleaded as affirmative defenses a lack of personal jurisdiction, with OH also pleading improper service. ²

After reviewing the procedural background of the case and the respective activities of OH and Nannen, the district court concluded that the service on OH by mail in With respect to Nannen, the district court reviewed each provision of N.Y.Civ.Prac.Law Sec. 302 (McKinney 1972 & Supp.1984), ³ the New York long-arm statute, that was alleged as a basis for jurisdiction. It summarily rejected claims for jurisdiction based upon transaction of business within the state, and upon ownership, use, or possession of real property within the state. It also rejected Easco's claim for jurisdiction based upon the commission outside the state of a tort that causes injury within the state, where the tortfeasor regularly does or solicits business in New York or derives substantial revenue from goods used or consumed within the state; the court found no basis for jurisdiction on this ground even though Nannen's principal, Jack Nannen, had been affiliated with other corporations that solicited business in New York, because none of those corporations had marketed tools while in New York and none were currently transacting business of any kind in New York. Finally, the court refused to grant jurisdiction based upon the commission of a tort outside the state which causes injury within the state, where the tortfeasor expects or should reasonably expect such act to have consequences in New York and derived substantial revenue from interstate or international commerce. Although finding that Nannen did derive substantial revenue from interstate commerce, the court concluded that Easco had "failed to allege facts to suggest that Nannen could reasonably anticipate being haled into a New York court as a consequence of the sale of its product to Easco's plant in Pennsylvania."

care of Nannen was not sufficient to subject OH to the jurisdiction of the court and therefore found it unnecessary to decide whether OH's contacts with the forum state rendered it amenable to the in personam jurisdiction of the District Court for the Eastern District of New York. The court dismissed the claims against OH conditionally, "until such time as Easco or another party has perfected service upon it of a summons and complaint."

DISCUSSION

Jurisdiction Over OH

OH, a corporation organized under the laws of Japan, maintains its offices and manufacturing plant at Higaski-Osaka, Japan. It makes forged steel products, including sledge heads, for sale in Japan and in the international market. It has no office, manufacturing plant, manufacturer's representatives or other facilities in the United States, no bank accounts or other assets in New York or any other state, and does not advertise in any United States publication or maintain a telephone listing in the United States; furthermore, OH has no corporate subsidiaries in the United States, nor is it affiliated with other corporate organizations doing business in the United States. It sells exclusively through Japanese trading companies located in Japan and ships by water to various ports other than the port of New York.

Easco's principal argument as to OH is that, where there are other means to effect proper service pursuant to Fed.R.Civ.P. 4(i), ⁴ an action should not be dismissed for failure to serve. See Alexander v. Unification Church of America, 634 F.2d 673, 675 (2d Cir.1980); Hill v. W. Bruns & Co., 498 F.2d 565, 568 (2d Cir.1974); Grammenos v. Lemos, 457 F.2d 1067, 1071 (2d Cir.1972). Easco also points out that the recently adopted Fed.R.Civ.P. 4(j), ⁵ which requires dismissal without prejudice if service is not made within 120 days after the filing of the complaint, expressly states that it "shall not apply to service in a foreign country pursuant to subdivision (i)" of the same rule. It argues that, given Rules 4(i) and 4(j), dismissal was inappropriate since it reasonably believed that it had served OH's American agent.

We cannot agree with either of Easco's arguments. Where service of process is insufficient, "[t]he courts have broad discretion to dismiss the action or to retain the case but quash the service that has been made on defendant," 5 C. Wright & A. Miller, Federal Practice and Procedure Sec. 1354, at 585 (1969) (footnote omitted), even though service will ordinarily be quashed and the action preserved where "there is a reasonable prospect that plaintiff ultimately will be able to serve defendant properly," id. at 586 (footnote omitted). Accord Novak v. World Bank, 703 F.2d 1305, 1310 (D.C.Cir.1983); Alexander, 634 F.2d at 675. Here, the district court did not contravene subdivision 4(j) even though it did not preserve the action. Subdivision 4(j), with its foreign country exception to the 120-day period for service, is simply inapplicable here, because Easco never attempted to serve process in a foreign country under subdivision (i); the 120-day time limit imposed by Rule 4(j) seems therefore perfectly proper, ⁶ especially since Easco has not exactly bent over backward to effect service. So saying, we hold the dismissal of OH for failure to make service is proper, noting that such dismissal is, in any event, conditional. We need not reach the question whether OH was amenable to personal jurisdiction in New York State.

Jurisdiction Over Nannen

Nannen is a Pennsylvania corporation importing, inter alia, sledge heads from Japan and other Far East countries. On behalf of Easco, Nannen located and placed orders with OH for sledge-head forgings made pursuant to Easco's specifications. Nannen's customers include Easco, which has its headquarters in Baltimore, Maryland, and three other companies located in Pennsylvania, Georgia, and Florida, respectively. Nannen is not an exclusive sales representative of OH, and OH does not assert any authority over the conduct of Nannen's business, both companies being entirely independent of each other. Nannen does not sell OH products directly in New York and asserts that it does not know what disposition is made of the OH forgings after they are imported from OH and sold to its customers. Easco's purchase orders for OH sledge-head forgings originated at Easco's Reading, Pennsylvania, facility and were issued to Nannen at its office in the same city.

In connection with the issue of in personam jurisdiction over Nannen, Easco's claim on appeal rests on its allegation that Nannen committed "a tortious act without the state causing injury to person or property within the state ... [and] ... expect[ed] or should reasonably [have] expect[ed] the act to have consequences in the state [while] deriv[ing] substantial revenue from interstate or international commerce," N.Y.Civ.Prac.Law Sec. 302(a)(3)(ii). As former Dean, now Judge, Joseph M. McLaughlin's Supplementary Practice Commentaries indicate, N.Y.Civ.Prac.Law Sec. 302, at 37 (McKinney Supp.1984), "it is apparent that the New York courts are construing the foreseeability requirement of subparagraph 3(ii) with an eye on the Supreme Court decision in World-Wide...