Sears, Roebuck & Co. v. Sears Plc

• Decision Date: 24 July 1990
• Docket Number: Civ. A. No. 88-342-JLL.
• Citation: 744 F. Supp. 1289
• Parties: SEARS, ROEBUCK & COMPANY, Plaintiff, v. SEARS plc and Sears Financial Services Limited, Defendants.
• Court: U.S. District Court — District of Delaware

744 F. Supp. 1289

SEARS, ROEBUCK & COMPANY, Plaintiff, v. SEARS plc and Sears Financial Services Limited, Defendants.

Civ. A. No. 88-342-JLL.

United States District Court, D. Delaware.

July 24, 1990.

Arthur G. Connolly, Jr. of Connolly, Bove, Lodge & Hutz, Wilmington, Del. (James A. Drobile of Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., and Nancy Schaefer of Schaefer, Rosenwein & Fleming, Chicago, Ill., of counsel), for plaintiff.

Jesse A. Finkelstein of Richards, Layton & Finger, Wilmington, Del. (Shelby R. Grubbs of Grant, Konvalinka & Grubbs, P.C., Chattanooga, Tenn., of counsel), for defendants.

MEMORANDUM OPINION

LATCHUM, Senior District Judge.

I. BACKGROUND

Sears, Roebuck and Company ("Roebuck") filed a trademark and trade name infringement suit on June 28, 1988, against Sears plc ("PLC"). See Docket Item ("D.I.") 1. On March 10, 1989, Roebuck amended its complaint to add Sears Financial Services Limited ("SFSL") as a defendant. Discovery closed on December 15, 1989. Currently before the Court are SFSL's motion to dismiss for lack of personal jurisdiction, D.I. 206, and for summary judgment. D.I. 224.¹ Because the Court finds that it lacks personal jurisdiction over SFSL, this Opinion addresses only those arguments pertaining to SFSL's motion to dismiss.²

II. FACTS

Defendant SFSL is a wholly owned subsidiary of PLC. Both companies are incorporated under the laws of England and Wales. SFSL markets and issues a consumer credit card in the United Kingdom to persons with an address in the United Kingdom. The name "Sears" appears on the SFSL credit card. Two individuals moved to Delaware from the United Kingdom with outstanding charges on their SFSL accounts. These two individuals received billing statements using the name "Sears" from SFSL while they resided in Delaware. When one of these individual's accounts became delinquent, SFSL retained a Delaware attorney to collect the debt. The delinquent cardholder maintains that when he was contacted by the attorney, the attorney represented that he had been hired by "Sears." See D.I. 239A at 11-12. SFSL has had no contact with the Delaware cardholders since 1986. Additionally, prior to 1987, some promotional material may have been sent to these two cardholders. See D.I. 223 at 7 n. 3.

SFSL advertises its "Sears Card" in Selfridges magazine, a British magazine. This magazine has been available in Delaware, at least at one newsstand, since 1986. See D.I. 239A at A25. Once in 1985 and once in 1986, Selfridges magazines containing advertisements for SFSL's "Sears Card" may have been available for purchase in the United States. See D.I. 223 at 8 n. 4. However, there is no evidence in the record that a Selfridges magazine with such an advertisement was actually sold in Delaware. SFSL also advertises its "Sears Card" in Women and Home, a British magazine available in the United States. One reader thought that an SFSL advertisement referred to Roebuck, see D.I. 239A at 30-31, although Roebuck does not contend that this reader is a resident of Delaware, or bought the magazine in Delaware.

III. DISCUSSION

Determining whether a court has personal jurisdiction over a defendant is a two-step process. First, pursuant to Federal Rule of Civil Procedure 4(e), the court must ascertain whether the defendant falls within the long-arm statute of the forum state.³ If the court finds that the state statute permits the exercise of personal jurisdiction, the court must then analyze the circumstances to ensure that asserting jurisdiction comports with due process. See Max Daetwyler Corp. v. R. Meyer, 762 F.2d 290, 293 (3d Cir.), cert. denied, 474 U.S. 980, 106 S.Ct. 383, 88 L.Ed.2d 336 (1985); United States v. Consolidated Rail Corp. ("Conrail"), 674 F.Supp. 138, 142 (D.Del.1987); Blue Ball Properties, Inc. v. McClain, 658 F.Supp. 1310, 1315 (D.Del. 1987); Dentsply International, Inc. v. Pentron Corp., 648 F.Supp. 856, 858 (D.Del.1986); Afros S.P.A. v. Krauss-Maffei Corp., 624 F.Supp. 464, 466 (D.Del. 1985); Moore v. Little Grant Indus., Inc., 513 F.Supp. 1043, 1046 (D.Del.1981), aff'd, 681 F.2d 807 (3d Cir.1982); LaNuova D & B, S.p.A. v. Bowe Co., Inc., 513 A.2d 764, 768 (Del.1986); Waters v. Deutz Corp., 479 A.2d 273, 274 (Del.1984). The burden of establishing jurisdiction under the Delaware long-arm statute is on the plaintiff. See Greenly v. Davis, 486 A.2d 669, 670 (Del.1984).

A. The Delaware Long-Arm Statute

Roebuck contends that this Court may exercise personal jurisdiction over SFSL under either of two subsections of the Delaware Long-Arm Statute, 10 Del.C. § 3104(c)(1) or 10 Del.C. § 3104(c)(3). Subsection (c)(1) permits the exercise of personal jurisdiction over a nonresident if that nonresident "transacts any business or performs any character of work or service in the state." A nonresident is subject to personal jurisdiction under subsection (c)(3) if the nonresident "causes tortious injury in the State by an act or omission in this State."⁴ The Delaware Supreme Court has interpreted both subsection (c)(1) and (c)(3) as conferring specific jurisdiction only, see LaNuova, 513 A.2d at 768; see also United States v. Conrail, 674 F.Supp. at 144, meaning that the cause of action must arise out of the defendant's alleged contacts with the forum. See Helicopteros Nacionales de Columbia v. Hall, 466 U.S. 408, 414 & n. 8, 104 S.Ct. 1868, 1872 & n. 8, 80 L.Ed.2d 404 (1984).

1. Section 3104(c)(1)

This Court, in Blue Ball Properties v. McClain, 658 F.Supp. 1310 (D.Del.1987), adduced a number of factors that could support the finding that a defendant had transacted business in Delaware. The Court looked to whether the defendant initiated the transaction in question by seeking out a Delaware resident, whether the contract required performance in Delaware, and the place the contract was accepted. See id. at 1316. In consideration of these factors, SFSL did not initiate the transaction by seeking out a Delaware resident. The two cardholders in question acquired their cards, and incurred the whole of their debt, in the United Kingdom. Similarly, the contract was entered into in the United Kingdom and did not require performance in Delaware.

A recent Illinois decision supports the conclusion that SFSL did not "transact" business in Delaware, within the meaning of the Delaware Long-Arm Statute.⁵ Konicki v. Wirta, 169 Ill.App.3d 21, 119 Ill.Dec. 692, 523 N.E.2d 160, appeal denied, 122 Ill.2d 576, 125 Ill.Dec. 219, 530 N.E.2d 247 (1988), concerned a note for $10,875 secured by a condominium in California. Initial negotiations concerning the note took place in California. The lender then moved to Illinois, and the parties subsequently agreed upon the note's terms. The borrower signed the note in California and sent it to the lender in Illinois. The borrower made payments on the note to the lender, who still resided in Illinois. The borrower then defaulted on the note. The holder of the note sued the borrower in Illinois, but the Illinois court refused to exercise personal jurisdiction over the borrower because the borrower had not transacted business in Illinois.

The Illinois court held that in order to transact business in Illinois, a party must "avail himself of the benefits of Illinois law." Id. 119 Ill.Dec. at 696, 523 N.E.2d at 164. In making that determination, the court used the same factors employed in Blue Ball Properties, supra. The court noted that "the fact that the note provided for payment `at any place designated' by the holder of the note is not an indication that defendants engaged in commercial activity in the forum, as the holder of the note could have demanded payment wherever he resided...." The court concluded that

The facts here are insufficient to demonstrate that defendants voluntarily sought the benefits and protections of the laws of this State. Rather, it appears from the record that defendants would fully expect that, as the negotiations for the note began in California, the note was executed by them in California, and the note was interrelated to the California condominium property, the laws of California would apply. We conclude that defendants' contacts with the State of Illinois are insufficient to support jurisdiction under the long-arm statute.

Id.

This Court finds that SFSL is in substantially the same position as the borrower in Konicki. The credit terms were set in the United Kingdom, the credit cards were issued in the United Kingdom, all of the debt was incurred in the United Kingdom, and the laws of the United Kingdom would apply to any action between the credit card holders and SFSL. Similarly, the credit card holders would have to have paid their debts regardless of where they resided. The mere fact that the two credit card holders chose to move to Delaware, from the United Kingdom where they acquired their credit cards, does not confer personal jurisdiction over SFSL under the Delaware Long-Arm Statute. Indeed, the case against SFSL is weaker than against the borrower in Konicki because no part of the contract was signed or accepted in Delaware.

The fact that SFSL hired an attorney to collect the debt of one of these two cardholders does not change the calculus. Although SFSL was not obligated to hire an attorney to attempt to collect the debt owed, SFSL's action was not the conduct "accommodating the buyer" the Third Circuit found to establish sufficient contacts in Mesalic v. Fiber Float Corp., 897 F.2d 696, 700 (3d Cir.1990). Nor was this "voluntary participation in the continuation" of the relationship that formed the basis of minimum contacts in North Penn Gas Co. v. Corning Natural Gas Co., 897 F.2d 687, 691 (3d Cir.1990), petition for cert. filed (June 29, 1990). SFSL's contact with Delaware did not "proximately result from actions by the defendant himself." North Penn Gas Co. v. Corning Natural Gas Co., 897 F.2d 687, 690 (3d Cir.1990) (quoting Burger King Corporation v. Rudzewicz, 471 U.S. 462, 475, 105 S.Ct....