Carolina Power & Light Co. v. Uranex

• Decision Date: 09 December 1977
• Docket Number: No. C-77-0123 RFP.,C-77-0123 RFP.
• Citation: 451 F. Supp. 1044
• Court: U.S. District Court — Northern District of California
• Parties: CAROLINA POWER & LIGHT COMPANY, a corporation, Plaintiff, v. URANEX, a "groupement d'interet economique," Defendant.

451 F. Supp. 1044

CAROLINA POWER & LIGHT COMPANY, a corporation, Plaintiff, v. URANEX, a "groupement d'interet economique," Defendant.

No. C-77-0123 RFP.

United States District Court, N. D. California.

September 26, 1977.

On Motion for Partial Reconsideration December 9, 1977.

Edward A. Morris, Bronson, Bronson & McKinnon, San Francisco, Cal., William E. Graham, Jr., Legal Dept., Carolina Power & Light Co., Raleigh, N. C., for plaintiff Carolina Power & Light Co.

James J. Brosnahan, William A. Helvestine, Morrison & Foerster, San Francisco, Cal., Michael K. Stanton, Weil, Gotshal & Manges, New York City, for defendant Uranex.

OPINION

PECKHAM, Chief Judge.

In 1973 Carolina Power & Light Company ("CP&L"), a North Carolina public utility company, contracted with defendant Uranex for the delivery of uranium concentrates to CP&L during the period 1977 to 1986. Uranex is a French groupement d'interet economique that markets uranium internationally. Following the recent and dramatic rise in the price of uranium fuel in the world market, Uranex either would not or could not deliver at the contract price, and requested renegotiation. CP&L has refused to enter any discussions aimed at contract modifications.

Earlier this year CP&L filed the present action against Uranex, and proceeded ex parte to attach an 85 million dollar debt owed to Uranex by Homestake Mining Company ("Homestake"), a San Francisco based corporation that markets uranium throughout the United States. The 85 million dollars is due to Uranex pursuant to a uranium supply contract between Homestake and Uranex, and has no relationship to the present litigation except as a potential source for CP&L to satisfy any judgment that might issue. But for the attachment the funds would have been transferred out of the country in the ordinary course of business.

The contract between CP&L and Uranex provides that disputes are to be submitted to arbitration in New York. At the time this lawsuit was filed CP&L sought to compel Uranex to enter arbitration. Since that time, however, Uranex voluntarily has entered arbitration and those proceedings are now going on in New York. Both parties agree that because of the arbitration agreement this court cannot adjudicate the merits of the dispute, but CP&L contends that the court should stay this action and maintain the attachment in order to protect any award that CP&L might receive in the New York arbitration. CP&L claims that Uranex has no other assets in this country with which to satisfy a judgment, and Uranex apparently does not dispute this proposition. Uranex has moved the court on several grounds to dismiss the complaint and quash the writ of attachment.

I. JURISDICTION

Uranex seeks to dismiss this action for lack of jurisdiction over the person. CP&L originally contended that this court had both in personam and traditional quasi in rem jurisdiction, although as will be discussed below, CP&L now takes a different approach in arguing that this court has some form of quasi in rem jurisdiction. There appears to be no real dispute over the following facts concerning Uranex's activities in California:

(1) Uranex is not licensed to conduct business in California, and has no office, no employees, no warehouse, no mailing address, no telephone, and no bank account in California. The 85 million dollars due Uranex from Homestake was to be wired from Homestake's bank in San Francisco to Uranex's bank in France.

(2) Uranex's contract with Homestake, a San Francisco based corporation, provides that the uranium will be shipped to Illinois and Oklahoma. Uranex has never sold products for use in California, never shipped products into California, and has never had a contract with any company connected with California besides Homestake. In fact, Uranex has no contracts with any United States corporations except CP&L and Homestake.

(3) Over five years ago Uranex solicited business from several California companies, but these contracts never went beyond the most preliminary stages. No solicitation of business in California has been made by Uranex since that time.

(4) Uranex subscribes to NUEXCO, a service published in Palo Alto, California, which monitors the state of the world uranium market. Also, Uranex representatives attend the annual Atomic Industrial Forum in San Francisco. Obviously, none of the underlying issues in the litigation between Uranex and CP&L has any connection with Uranex's limited activities in California.

Pursuant to Rule 4(d) of the Federal Rules of Civil Procedure, the federal courts may employ the personal jurisdiction statutes of the states where they sit. Section 410.10 of the California Code of Civil Procedure, the California "long arm" statute, simply provides that:

A court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or the United States.

Accordingly, the only question to be resolved is whether or not the assertion of jurisdiction over Uranex comports with minimum constitutional standards.

First, it can only be concluded that Uranex's limited contacts with the State of California will not support the assertion of in personam jurisdiction under the constitutional standards of International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Uranex's activities in California are far below any level that might be considered an ongoing presence within the jurisdiction, or that might support the assertion of general jurisdiction over any and all causes of action against the defendant. Furthermore, the claims involved in this litigation have no connection whatsoever with Uranex's activities in California.

At the time of the hearing on these motions, CP&L argued that this court could in any event assert quasi in rem jurisdiction over the debt due Uranex from Homestake. Under traditional theories of jurisdiction that argument was undoubtedly correct. See Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958); Harris v. Balk, 198 U.S. 215, 25 S.Ct. 625, 49 L.Ed. 1023 (1905). Since the hearing, however, the Supreme Court has issued its decision in Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977), in which the Court radically altered the constitutional standard by which assertions of jurisdiction over property are to be measured:

The case for applying to jurisdiction in rem the same test of "fair play and substantial justice" as governs assertions of jurisdiction in personam is simple and straightforward. It is premised on recognition that "the phrase, `judicial jurisdiction over a thing,' is a customary elliptical way of referring to jurisdiction over the interests of persons in a thing." Restatement (Second) of Conflict of Laws § 56, introductory note. This recognition leads to the conclusion that in order to justify an exercise of jurisdiction in rem, the basis for jurisdiction must be sufficient to justify exercising "jurisdiction over the interests of persons in a thing." The standard for determining whether an exercise of jurisdiction over the interests of persons is consistent with the Due Process Clause is the minimum contacts standard elucidated in International Shoe.

. . . .

. . . For the type of quasi in rem action typified by Harris v. Balk . . . accepting the proposed analysis would result in significant change. These are cases where the property which now serves as the basis for state court jurisdiction is completely unrelated to the plaintiff's cause of action. Thus, although the presence of a defendant's property in a State might suggest the existence of other ties among the defendant, the State, and the litigation, the presence of the property alone would not support the State's jurisdiction. If those other ties did not exist, cases over which the State is now thought to have jurisdiction could not be brought in that forum.

. . . .

. . . "Traditional notions of fair play and substantial justice" can be as readily offended by the perpetuation of ancient forms that are no longer justified as by the adoption of new procedures that are inconsistent with the basic values of our constitutional heritage. . . . The fiction that an assertion of jurisdiction over property is anything but an assertion of jurisdiction over the owner of the property supports an ancient form without substantial modern justification. Its continued acceptance would only serve to allow state court jurisdiction that is fundamentally unfair to the defendant.

We therefore conclude that all assertions of state court court jurisdiction must be evaluated according to the standards set forth in International Shoe and its progeny.

Id. at 206, 97 S.Ct. at 2581-85. The Court then went on to decide that Delaware's assertion of quasi in rem jurisdiction under its stock sequestration statute, which premised jurisdiction only on the legal presumption that the stock of all Delaware corporations was located in Delaware, could not meet these constitutional standards.

As described above, Uranex's contacts with California do not afford an adequate basis under International Shoe to support an assumption of in personam jurisdiction by this court. Since Shaffer v. Heitner has abrogated quasi in rem jurisdiction as a separate and insular conceptual category, the determination that this court lacks in personam jurisdiction might appear to resolve the entire jurisdictional issue. Plaintiff CP&L, however, points to the following passages in the Shaffer opinion:

The primary rationale for treating the presence of property as a sufficient basis for jurisdiction to adjudicate claims over which the State would not have jurisdiction if International Shoe applied is that a wrongdoer

"should not be able to avoid payment of his obligations by the expedient of removing his assets to a place where he is not subject to an in personam suit." Restatement (Second) of Conflicts § 66, comment a.

. . .

This justification, however, does

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