Agrashell, Inc. v. Bernard Sirotta Company

• Decision Date: 05 May 1964
• Docket Number: No. 63-C-206.,63-C-206.
• Citation: 229 F. Supp. 98
• Parties: AGRASHELL, INC., Plaintiff, v. BERNARD SIROTTA COMPANY, Edwin M. Sirotta and Milton A. Sirotta, Defendants and Third-Party Plaintiffs, v. HAMMONS PRODUCTS COMPANY, Third-Party Defendant.
• Court: U.S. District Court — Eastern District of New York

229 F. Supp. 98

AGRASHELL, INC., Plaintiff, v. BERNARD SIROTTA COMPANY, Edwin M. Sirotta and Milton A. Sirotta, Defendants and Third-Party Plaintiffs, v. HAMMONS PRODUCTS COMPANY, Third-Party Defendant.

No. 63-C-206.

United States District Court E. D. New York.

May 5, 1964.

Albert C. Johnston, New York City, for plaintiff.

Edward Halle, Garden City, N. Y., for defendants and third-party plaintiffs; David F. Cohen, New York City, of counsel.

Lawrence C. Moore, New York City, for third-party defendant.

BARTELS, District Judge.

This is a motion to quash service on the third-party defendant and to dismiss the third-party complaint. Involved is the question whether the acts of the non-domiciliary third-party defendant in relation to the State of New York, fall within the category of transacting "any business within the State" subjecting it to personal jurisdiction within the State pursuant to Section 302 of the Civil Practice Law and Rules.

The original action was commenced by plaintiff Agrashell, Inc., a Delaware corporation, against the defendant Bernard Sirotta Company (a partnership) and its two partners (Sirotta) for infringement of certain patent rights and licenses in selling pelletized black walnut shells within the last six years within the district and elsewhere, as a result of which infringement plaintiff seeks relief by means of injunction, accounting and damages. Thereafter Sirotta, with leave of the court, joined Hammons Products Company, a Missouri corporation, as a third-party defendant, alleging in their complaint that the said walnut shells were purchased by Sirotta from Hammons pursuant to certain warranties and indemnity agreements and that if Sirotta is liable to Agrashell, then Hammons is similarly liable to Sirotta.

I

The first contact between the parties was a printed circular from Hammons to Sirotta, dated April 30, 1958, advertising Hammons' products and soliciting orders f. o. b. Stockton, Missouri. Sirotta replied on May 2nd requesting best price quotations and samples "in both Truck Load, and Car Load quantities, also state deliveries on your various grades." On May 15th Hammons quoted car load lots "f. o. b. Bolivar, Missouri" and "f. o. b. Stockton, Missouri".¹ On June 16th, apparently at Sirotta's request, a quantity of black walnut shell samples was delivered to Sirotta by Hammons, via truck, for which there was no charge. On July 2nd Hammons wrote Sirotta again quoting prices per ton f. o. b. Stockton, Missouri. On July 23rd Sirotta entered an order with Hammons for one truckload at a specified price "plus trucking charge not to exceed $1.42 per 100 lbs. delivered to us in Brooklyn NY" and requesting Hammons to do whatever it could "to keep the delivered prices to us as low as possible." The letter contained the following instructions:

"If you can negotiate for a rate lower than $1.42, please do so. We leave that to your discretion. Regarding the trucking company, we cannot use any trucking outfit that might violate any ICC regulations. Since we are not familiar with your trucking arrangements, we would expect you to make all arrangements for your account with the trucking company, and this order is to be delivered to us FOB our door, Brooklyn NY — and you are to assume all responsibility for trucking arrangements. Prepay all freight charges to us so that we have no dealings with the trucking outfit. If you can work out a rate of less than $1.42 cwt, please do so."

In the same letter Sirotta inquired of the trucker's route in case they wished the trucker to drop off material along the way.²

On August 6th, pursuant to said order, there was delivered by a private trucker to Sirotta, a quantity of black walnut shells invoiced by Hammons at $1,079.04, which included $1.42 per 100 lbs. freight, the invoice stating that it was "SHIPPED VIA Truck".

On November 8th Sirotta ordered another truckload of black walnut shells, stating "Ship via your trucker, as before, freight prepaid to us and bill us FOB our door, as previously" and stating that Sirotta was sending Hammons new 5 ply bags and would arrange "to have a lab in St. Louis do the testing" of the bags.³

Following these deliveries to Brooklyn apparently made by independent truckers engaged by Hammons, and also deliveries to other parts of the country at Sirotta's instructions, Sirotta forwarded on December 17, 1958 a blanket purchase order to Hammons for 250 tons of ground black walnut shells, providing for various releases during the year 1959 under f. o. b. terms reading as follows:

"F. O. B. POINTS at Purchaser's option:

Stockton, Mo. in Truckload, Less Carload or Less Truckload Lots

Bolivar, Mo. or El Dorado Springs, Mo. in Carload lots"

and containing the following provision:

"Seller to make and route shipments in accordance with instructions from Purchaser.

* * * * * *

"Seller agrees to permit inspection at its plant and also to comply with U. S. Government inspection requirements on any Government contracts hereafter made by Purchaser for the sale of these materials."⁴

The order also contained a provision that the seller would save the purchaser harmless against suits involving infringements of United States or Canadian letters patent by reason of the use of the articles ordered and as amended by an amendment dated February 18, 1959, was signed by Sirotta in Brooklyn and accepted by Hammons in Missouri.⁵

Pursuant to the agreement thus formulated, take-downs were requested by Sirotta and shipments with accompanying invoices were made by Hammons, freight prepaid into Brooklyn throughout the year 1959 and part of the year 1960. The first delivery was invoiced February 10, 1959, prior to the amendment to the contract, and the last delivery was on January 14, 1960. There were seven deliveries to Brooklyn under the December contract, totalling about 115 tons out of the 250 tons contracted for, the balance of the goods being delivered outside of New York. The deliveries were made by truckers⁶ who were paid by Hammons⁷ and the amount of the freight charges was added to the invoice. Thus, including the three deliveries in 1958, there was a total of ten deliveries in Brooklyn of approximately 180 tons of walnut shells, valued at $7,800 with additional charges of $5,700 for freight.⁸

Hammons' affidavits affirmed that it never maintained any agency, salesmen, stock of goods, nor representative to do or transact any business in the State of New York, nor was it ever listed in any telephone book in the State of New York, nor was it authorized or qualified to do business in the State of New York. It further contends that it never transacted any business in the State of New York; that the contract was made in Missouri, and that all material sold and delivered by it to Sirotta was f. o. b. Missouri, at points only in the State of Missouri.

Sirotta contends (1) that the amendment to the contract was made at Hammons' request in Brooklyn (although there is no evidence to support this assertion) and hence was a New York contract, and (2) that the deliveries made in New York pursuant to the contract, were f. o. b. points of delivery and hence were deliveries made by Hammons in New York State.

II

The New York statute⁹ does not spell out with any particularity the meaning of the phrase "transacts any business within the state" and there are no precise standards of measurement to determine the issue. Each case depends on its own particular facts. The principles applicable, however, are derived from the familiar landmark cases of International Shoe Co. v. State of Washington, 1945, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95; McGee v. International Life Ins. Co., 1957, 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223; and Hanson v. Denckla, 1958, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed. 2d 1283. From them it is now well established that a State may by legislation extend its jurisdiction over foreign corporations without depending upon the inflexible rule of presence as enunciated in Pennoyer v. Neff, 1877, 95 U.S. 714, 24 L.Ed. 565, or the fiction of consent. State jurisdiction may be expanded to subject a foreign corporation to its courts if the corporation has only "certain minimum contacts with it such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice'". International Shoe Co. v. State of Washington, supra, 326 U.S. p. 316, 66 S.Ct. p. 158, 90 L.Ed. 95. In the last mentioned case it was remarked that while some acts may be insufficient to confer jurisdiction, "other such acts, because of their nature and quality and the circumstances of their commission, may be deemed sufficient to render the corporation liable to suit" (326 U.S. p. 318, 66 S.Ct. p. 159, 90 L.Ed. 95) and 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." But Hanson v. Denckla, supra, made it clear that restrictions still remain on the State's personal jurisdiction, stating: "The unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State. * * * it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." (357 U.S. p. 253, 78 S.Ct. p. 1239, 2 L.Ed.2d 1283.)

The language of the New York statute is general and there is nothing in its wording which violates the enunciated criteria or the due process clause of the Constitution.¹⁰ The philosophy and purpose of the statute is to afford judicial protection to citizens of the State by providing them with a forum for process against non-residents without subjecting the foreign corporation to unreasonable inconvenience.¹¹ To determine jurisdiction, the nature of all the...