All-Star Ins. Corp., Matter of

• Court: Wisconsin Supreme Court
• Writing for the Court: BEILFUSS; ABRAHAMSON
• Citation: All-Star Ins. Corp., Matter of, 327 N.W.2d 648, 110 Wis.2d 72 (Wis. 1983)
• Decision Date: 05 January 1983
• Docket Number: Nos. 81-1349,ALL-STAR,81-1350,s. 81-1349
• Parties: In the Matter of the Liquidation ofINSURANCE CORPORATION, a Wisconsin Corporation. (Two Cases). Roderick B. McNAMEE, Special Deputy Commissioner of Insurance of the State of Wisconsin for the Liquidation of All-Star Insurance Corporation, Plaintiff-Respondent, v. APS INSURANCE AGENCY, INC., Defendant-Appellant. Roderick B. McNAMEE, Special Deputy Commissioner of Insurance of the State of Wisconsin for the Liquidation of All-Star Insurance Corporation, Plaintiff-Respondent, v. LEE M. SCARBOROUGH & COMPANY, Defendant-Appellant.

Page 648

327 N.W.2d 648

110 Wis.2d 72

In the Matter of the Liquidation of ALL-STAR INSURANCE

CORPORATION, a Wisconsin Corporation. (Two Cases).

Roderick B. McNAMEE, Special Deputy Commissioner of

Insurance of the State of Wisconsin for the

Liquidation of All-Star Insurance

Corporation, Plaintiff-Respondent, v. APS INSURANCE AGENCY, INC., Defendant-Appellant.

Roderick B. McNAMEE, Special Deputy Commissioner of

Insurance of the State of Wisconsin for the

Liquidation of All-Star Insurance

Corporation, Plaintiff-Respondent, v. LEE M. SCARBOROUGH & COMPANY, Defendant-Appellant.

Nos. 81-1349, 81-1350.

Supreme Court of Wisconsin.

Argued Dec. 1, 1982.

Decided Jan. 5, 1983.

Michael A. Bowen, Milwaukee, argued, for APS Ins. Agency, Inc.; Maurice J. McSweeney and Foley & Lardner, Milwaukee, on brief.

Christine K. Ohm, Milwaukee, argued, for Lee M. Scarbough & Co.; Michael J. Pfau and Kluwin, Dunphy, Hankin & McNulty, Milwaukee, on brief.

Matthew J. Flynn, Milwaukee, argued, for McNamee; John A. Rothstein, James A. Urdan and Quarles & Brady, Milwaukee, on brief.

BEILFUSS, Chief Justice.

This is an appeal from judgments entered based upon orders granting summary judgment in favor of the plaintiff in two actions which were consolidated before the circuit court and for purposes of appeal.

These appeals arise out of the liquidation of the All-Star Insurance Corporation. All-Star, a Wisconsin corporation formerly engaged in the business of insurance, was ordered into liquidation on March 1, 1977, pursuant to ch. 645, Stats. 1977. The plaintiff, Roderick B. McNamee was appointed Special Deputy Commissioner of Insurance for the purposes of All-Star's liquidation. In this capacity, the plaintiff commenced these actions against the defendants, APS Insurance Agency, Inc. (APS) and Lee M. Scarborough & Company (Scarborough), to recover sums allegedly due under separate agencies contracts between the two defendants and All-Star. ¹

Both defendants separately entered into agency agreements with All-Star and served as agents soliciting applications for insurance for All-Star pursuant to these agreements. APS is an Illinois corporation and entered into an agency contract with All-Star on June 1, 1973. APS's relationship with All-Star began at All-Star's initiation, when All-Star asked APS to serve as its agent. In October, 1975 APS stopped serving as All-Star's agent pursuant to an order from the Illinois Insurance Commissioner. Scarborough is a Louisiana corporation and entered into its agency contract with All-Star on April 18, 1973. It appears that the agency agreement was in effect until the time All-Star was ordered into liquidation, but the record is not entirely clear on this point.

The only contacts either defendant ever had with Wisconsin were their respective agency contracts with All-Star and their actions incident to those contracts. Neither defendant is licensed to do business in Wisconsin. The defendants have no place of business, office, property, mailing address telephone listing, bank account nor any agents or employees in the state. Neither defendant has engaged in any business in the state, nor has authorized any agent or employee to transact business in Wisconsin. All the contacts between the defendants and All-Star pursuant to the agency contracts occurred outside of Wisconsin or by interstate mail or telephone.

In 1979 the plaintiff commenced these actions against the defendants to recover unpaid premium and unearned commissions allegedly owed to All-Star under the contracts. Both defendants moved to dismiss the complaints for lack of personal jurisdiction. The trial court consolidated the cases for the hearing on the merits of the motions.

The trial court denied the motions finding personal jurisdiction pursuant to sec. 645.04(5)(a), Stats. The court rejected the defendants' contention that the exercise of personal jurisdiction pursuant to this statute was unconstitutional. The court held that the Supreme Court's decision in McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957), allowed the exercise of personal jurisdiction pursuant to such a special jurisdictional statute primarily because of the regulated nature of the insurance industry.

The trial court subsequently entered summary judgment in favor of the plaintiff on the merits of the actions as to both defendants. APS appealed both the personal jurisdiction issue and the determination on the merits. Scarborough appealed only as to the issue of personal jurisdiction. We accepted the appeal on certification from the court of appeals.

The issue on review is whether a Wisconsin court may constitutionally exercise jurisdiction over the defendants pursuant to sec. 645.04(5)(a), Stats. We hold that the assertion of jurisdiction pursuant to this statute does not violate due process.

The determination of whether Wisconsin courts have jurisdiction over a nonresident defendant is a two-step process. First, it must be determined whether the defendants' contacts with Wisconsin subject them to jurisdiction under a Wisconsin long arm statute. If so, then the court must determine whether the exercise of jurisdiction under the statute comports with due process requirements. Hasley v. Black, Sivalls & Bryson, Inc., 70 Wis.2d 562, 575, 235 N.W.2d 446 (1975); Zerbel v. H.L. Federman & Co., 48 Wis.2d 54, 60, 179 N.W.2d 872 (1970). ²

Because this case arises out of the liquidation of All-Star, jurisdiction over the defendants is asserted under sec. 645.04(5)(a), Stats., which provides:

"(5) PERSONAL JURISDICTION, GROUNDS FOR. In addition to other grounds for jurisdiction provided by the law of this state, a court of this state having jurisdiction of the subject matter has jurisdiction over a person served pursuant to s. 801.11 in an action brought by the receiver of a domestic insurer or an alien insurer domiciled in this state:

"(a) If the person served is obligated to the insurer in any way as an incident to any agency or brokerage arrangement that may exist or has existed between the insurer and the agent or broker, in any action on or incident to the obligation;"

This statute is a special jurisdictional statute applicable in liquidation proceedings under ch. 645, Stats. The statute allows the exercise of jurisdiction over any person who is obligated to a Wisconsin insurer involved in a ch. 645 proceeding, incident to an agency or brokerage agreement. ³ Both defendants concede that the language of sec. 645.04(5)(a) covers their situation. Thus, the only issue before this court is whether the exercise of jurisdiction pursuant to this statute is constitutional.

The fourteenth amendment limits the power of a state court to render a valid personal judgment against a nonresident defendant. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291, 100 S.Ct. 559, 564, 62 L.Ed.2d 490 (1980). A state court may exercise jurisdiction over a nonresident if "minimum contacts" exist between the defendant and the forum such that the assertion of jurisdiction is consistent with " 'traditional notions of fair play and substantial justice.' " International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945), quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 342, 85 L.Ed. 278 (1940). Physical presence is not required; the defendant need only act indirectly in the state. Wisconsin Electrical Manufacturing Co., Inc. v. Pennant Products, Inc., 619 F.2d 676, 678 n 6 (7th Cir.1980). The relationship between the defendant and the forum must be such that it is reasonable and fair to require the defendant to defend the particular suit in the particular forum. World-Wide Volkswagen, 444 U.S. at 291, 100 S.Ct. at 564. Thus, the touchstone of the exercise of jurisdiction is reasonableness and fairness.

The defendants contend that the exercise of jurisdiction in these actions violates due process. They assert that the statute is unconstitutional on its face because it allows the exercise of jurisdiction without requiring even a single isolated contact with Wisconsin. They further contend that the statute, as applied, is unconstitutional because it allows the exercise of jurisdiction where the nonresident's only contact with the state is a contract with a Wisconsin plaintiff. We believe that under the decision in McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957) both these arguments fail.

McGee involved a suit instituted in California by the beneficiary of a life insurance policy against the Texas insurance company which denied coverage. The only contacts between the insurer and California were the mailing of a reinsurance certificate to the insured in California and the policyholder's payment of the premiums by mail. The court found that due process was not violated by the exercise of jurisdiction based on these minimal contacts finding that "[i]t is sufficient for purposes of due process that the suit was based on a contract which had substantial connection with that State." 355 U.S. at 223, 78 S.Ct. at 201. The court reasoned:

"The contract was delivered in California, the premiums were mailed from there and the insured was a resident of that State when he died. It cannot be denied that California has a manifest interest in providing effective means of redress for its residents when their insurers refuse to pay claims. These residents would be at a severe disadvantage if they were forced to follow the insurance company to a distant State in order to hold it legally accountable. When claims were small or moderate individual claimants frequently could not afford the cost of bringing an action in a foreign forum--thus in effect making the company judgment proof. Often the crucial witnesses--as here on the company's defense of suicide--will be found in the insured's locality. Of course, there may be inconvenience to the insurer if it is held amenable to suit in...