Bendix Autolite Corp. v. Midwesco Enterprises, Inc.

• Decision Date: 03 June 1987
• Docket Number: No. 85-3784,85-3784
• Citation: 820 F.2d 186
• Parties: BENDIX AUTOLITE CORPORATION, Plaintiff-Appellant, v. MIDWESCO ENTERPRISES, INC., Defendant/Third-Party, Plaintiff-Appellee, International Boiler Works Company, Third-Party Defendant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 186

820 F.2d 186

55 USLW 2673

BENDIX AUTOLITE CORPORATION, Plaintiff-Appellant, v. MIDWESCO ENTERPRISES, INC., Defendant/Third-Party, Plaintiff-Appellee, International Boiler Works Company, Third-Party Defendant.

No. 85-3784.

United States Court of Appeals,

Sixth Circuit.

Argued April 17, 1987.

Decided June 3, 1987.

Noel C. Crowley, New York City, Philip L. Dombey, Leatherman, Witzler, Dombey, Hart and Kobil, Perrysburg, Ohio, J. Kenneth Wainwright, Jr., argued, Allied Corp. Law Dept., Morristown, N.J., for Bendix Autolite Corp.

Heil-Quaker Corp., Stanley M. Lipnick, Arnstein, Gluck, Lehr, Barron & Milligan, Chicago, Ill., amicus curiae for Bendix.

Harland M. Britz, Toledo, Ohio, Ira J. Bornstein, argued, Harvey J. Barnett, Chicago, Ill., for Midwesco Enterprises, Inc.

Before MARTIN, JONES, and MILBURN, Circuit Judges.

BOYCE F. MARTIN, Jr., Circuit Judge.

Bendix Autolite Corporation appeals the grant of summary judgment to Midwesco Enterprises, Inc. in this diversity contract dispute. Bendix claims the district court erred in finding that Ohio's tolling statute imposes an impermissible burden on interstate commerce. For the following reasons, we affirm.

Bendix is a Delaware corporation with its principal place of business in Ohio. Midwesco is an Illinois corporation with its principal place of business in Illinois. Midwesco is not authorized to do business in Ohio, has no corporate office or facility in Ohio, and has not appointed an agent for service of process in Ohio.

Bendix and Midwesco entered into a contract in August 1974 whereby Midwesco would supply and install a coal-fired boiler system at a Bendix facility in Fostoria, Ohio. Bendix, dissatisfied with the system, filed suit in December 1980 claiming Midwesco improperly installed the boiler and knowingly installed a system that was too small to produce the quantity of steam specified in the contract.

Midwesco moved for summary judgment arguing that Bendix's action was barred by Ohio's statute of limitations. Ohio allows four years for bringing claims for breach of contract for the sale of goods and four years for claims for fraud. Ohio Rev.Code Secs. 1302.98, 2305.09(C).

Midwesco raised two arguments in its motion, both concerning the applicability of Ohio's saving clause which reads:

When a cause of action accrues against a person, if he is out of state, or has absconded, or conceals himself, the period of limitation for the commencement of the action as provided in sections 2305.04 to 2305.14, inclusive, and sections 1302.98 and 1304.29 of the Revised Code, does not begin to run until he comes into the state or while he is so absconded or concealed. After the cause of action accrues if he departs from the state or absconds or conceals himself, the time of his absence or concealment shall not be computed as any part of a period within which the action must be brought.

Id. Sec. 2305.15.

First, Midwesco contended that the statute was inapplicable because Midwesco was, in effect, present in Ohio during the relevant period. Midwesco claimed that because it was continually subject to the long arm jurisdiction of the Ohio courts, it should be considered within the state for purposes of the statute. Second, Midwesco argued that the statute was inapplicable because it imposed an impermissible burden on interstate commerce in violation of the Constitution. The district court rejected Midwesco's first argument but granted summary judgment on the ground that the tolling statute is unconstitutional.

A court may determine whether a state statute violates the commerce clause by employing either a balancing test or a per se rule. The balancing approach is appropriate in instances where there is no patent discrimination against interstate trade and where other legislative objectives are credibly advanced. As the Supreme Court explained in Philadelphia v. New Jersey:

Where the statute regulates evenhandedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.... If a legitimate local purpose is found, then the question becomes one of degree. And the extent of the burden that will be tolerated will of course depend on the nature of the local interest involved, and on whether it could be promoted as well with a lesser impact on interstate activities.

437 U.S. 617, 624, 98 S.Ct. 2531, 2535, 57 L.Ed.2d 475 (1978) (quoting Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 847, 25 L.Ed.2d 174 (1970)).

In other instances, the burden on interstate commerce is deemed so direct and substantial that the Court has said it is unnecessary to balance the competing interests and has ruled state statutes to be per se violations of the commerce clause. See South Carolina Highway Dept. v. Barnwell Bros., Inc., 303 U.S. 177, 184 n. 2, 58 S.Ct. 510, 513 n. 2, 82 L.Ed. 734 (1938). The per se rule is commonly applied when state regulations discriminate against foreign corporations engaged exclusively in interstate commerce merely because they have failed to qualify to do business in the state. See Allenberg Cotton Co., Inc. v. Pittman, 419 U.S. 20, 95 S.Ct. 260, 42 L.Ed.2d 195 (1974); Dahnke-Walker Milling Co. v. Bondurant, 257 U.S. 282, 42 S.Ct. 106, 66 L.Ed. 239 (1921).

The district court relied on two recent cases in deciding that Ohio's statute is unconstitutional. In Coons v. American Honda Motor Co., 94 N.J. 307, 463 A.2d 921 (1983), the New Jersey Supreme Court reviewed a tolling statute similar to Ohio's. ¹ The court first determined that in order to be "represented" in New Jersey within the meaning of the statute, a corporation had to be licensed to do business in the state. The court then held the statute to be a per se violation of the commerce clause, stating that:

[t]he legislature cannot accomplish indirectly that which it could not do directly; it cannot, in effect, force licensure on foreign corporations dealing exclusively in interstate commerce by otherwise preventing them from gaining the benefit of the statute of limitations defense. The burden thus imposed on interstate commerce is unconstitutional.

463 A.2d at 927.

In McKinley v. Combustion Engineering, Inc., 575 F.Supp. 942 (D.Idaho 1983), the court dealt with a tolling statute that required corporations to meet certain provisions prior to receiving the benefits of the statute of limitations. ² These...