Allen v. Toshiba Corp.

• Decision Date: 15 June 1984
• Docket Number: No. CIV-81-994 C.,CIV-81-994 C.
• Citation: 599 F. Supp. 381
• Parties: Jo ALLEN, d/b/a/ Automatic Business Systems, Plaintiff, v. TOSHIBA CORPORATION, et al., Defendants.
• Court: U.S. District Court — District of New Mexico

599 F. Supp. 381

Jo ALLEN, d/b/a/ Automatic Business Systems, Plaintiff, v. TOSHIBA CORPORATION, et al., Defendants.

No. CIV-81-994 C.

United States District Court, D. New Mexico.

June 15, 1984.

George M. Moore, Albuquerque, N.M., for plaintiff.

John J. Witmeyer, III and Michael L. Anania, Ford, Marrin, Esposito & Witmeyer, New York City, Civerolo, Hansen & Wolf, P.A., Richard Civerolo, Kathy Levy, Albuquerque, N.M. for Toshiba.

Gregory D. Huffaker, Jr., Poole, Tinnin & Martin, Albuquerque, N.M., J. William Hayton, Bell, Boyd & Lloyd, Chicago, Ill., for Underwriters' Laboratories.

MEMORANDUM OPINION AND ORDER

CAMPOS, District Judge.

This matter comes before the Court on three Motions to Dismiss filed separately by the various Defendants. The Plaintiff has also filed a Motion to Strike Affidavits as a partial response to the Defendants' legal arguments. The Court has considered the parties' memoranda, reviewed the materials accompanying the Motions,¹ and examined the legal authority which is germane to the issues. It is the Court's conclusion that the Defendants' Motions are, for the most part, well taken and the relief which has been requested should be substantially granted.

This case arises from the dissolution of a business relationship between the Plaintiff, Jo Allen d/b/a Automatic Business Systems ("ABS") and one of the Defendants, Toshiba America, Inc. ("TAI"). In 1977, the Plaintiff was appointed by TAI to be an authorized photocopier dealer in Albuquerque, New Mexico. The Plaintiff purchased photocopies and reprographic materials from TAI. TAI purchased the photocopiers² from the manufacturer, the Defendant Toshiba Corporation ("Toshiba"). These purchases were transacted in Japan. TAI is a wholly owned subsidiary of Toshiba.

ABS continued doing business as a TAI dealership through 1978, 1979, and 1980. The Plaintiff offered various models of photocopiers to its customers. It is alleged that the Toshibafax copiers, by reason of defective design and manufacture, developed serious mechanical problems, that they "had a tendency to catch on fire and emit smoke" and further "made poor quality copies." Civil Complaint, Second Cause of Action, ¶ VI. The Plaintiff claims that "the defects in the machines severely and substantially impaired their value to Allen inasmuch as Allen was in the business of selling photocopy machines to business customers." Id., Twelfth Cause of Action, ¶ VI. The defects, together with various other "problems" allegedly encountered in the use of the copy machines,³ constitute the core of the Plaintiff's claims for breach of warranties, fraudulent misrepresentations, and various torts brought under products liability theories.

The Plaintiff derives, from this fact pattern, twelve causes of action which are as follows: (1) breach of contract; (2) intentional faulty design, manufacture, assembly and testing; (3) negligent design, manufacture, assembly and testing; (4) breach of express warranty; (5) breach of implied warranty of fitness for purpose; (6) breach of implied warranty for merchantability; (7) negligent failure to warn; (8) action for fraudulent misrepresentation; (9) action for fraud in non-disclosures of material facts; (10) action for deceit in conduct, transactions and operations; (11) negligent misrepresentation; and (12) commercial revocation of previous agreements and obligations. The Defendants have moved to dismiss all of the claims.

The Complaint also joins as party Defendants Sidney Reisch and Underwriters Laboratories, Inc. The Defendant Underwriters is a Delaware corporation with its principal place of business in Illinois. It is alleged that Underwriters was responsible for the testing and evaluation of Toshibafax photocopiers. The Defendant Reisch is an employee of TAI who was formerly national sales manager of the business equipment division, copier operations, and is presently the vice president and general manager of the copier products division. Reisch is sued individually for alleged acts committed in his corporate capacity.

The Defendant Reisch has filed a Motion to Dismiss asserting the Court's lack of personal jurisdiction over him for this action. The uncontroverted affidavit of Mr. Reisch avers that he has never been a resident of New Mexico, that he has never owned real property within the state, that he derives no personal income from New Mexico, that any business transactions with the Plaintiff were conducted solely within the scope of his employment with TAI, and finally that he owns no stock in either TAI or Toshiba. Mr. Reisch's affidavit is supported by the allegations concerning his activities, found in the Complaint.

The Complaint alleges as pertinent to this Defendant that:

Defendant Sid Reisch ("Reisch") is a citizen of the United States, residing in the State of California, and was and is at all times material to these pleadings, at first National Sales Manager of TAI and subsequently its Vice-President. In those capacities he was and is at all times material to this action transacting business and contracting to supply goods and manufactured products within the State of New Mexico. Defendant Reisch, at all times which are material to these pleadings derived and still continues to derive substantial compensation from the sales of goods and manufactured products sold and used within the State of New Mexico.

Civil Complaint, First Cause of Action, ¶ VI (emphasis added). The Complaint also alleges that "the Defendants and each of them were at all times herein mentioned, agents of each of the remaining Defendants and were at all times herein mentioned acting within the scope and agency of said employment." Id. at ¶ X (emphasis added). These two references, aside from the general allegations, constitute the sum total of the specific allegations concerning Mr. Reisch.⁴ Thus, it can safely be said that Reisch's contacts with New Mexico, if any, were purely in a corporate capacity, that there is neither allegation nor indication that he performed any commercial acts of a personal nature outside the scope of his employment.

The Tenth Circuit has recognized, as an equitable principle, what has come to be known as the fiduciary or corporate shield doctrine. See Wilshire Oil Co. v. Riffe, 409 F.2d 1277, 1281-82 (10th Cir.1969). See also Segil v. Gloria Marshall Management Co., 568 F.Supp. 915, 918 (D. Utah 1983). A succinct statement of the rule was recently formulated by the Second Circuit.

If an individual has contact with a particular state only by virtue of his acts as a fiduciary of the corporation, he may be shielded from the exercise, by that state, of jurisdiction over him personally on the basis of that conduct. Thus, his conduct, although it may subject him to personal liability, may not form the predicate for the exercise of jurisdiction over him as an individual.

Marine Midland Bank v. Miller, 664 F.2d 899, 902 (2d Cir.1981); See also Escude Cruz v. Ortho Pharmaceutical Corp., 619 F.2d 902, 906 (1st Cir.1980) ("The general rule is that jurisdiction over the individual officers of a corporation may not be based merely on jurisdiction over the corporation."); Bloom v. A.H. Pond Co., 519 F.Supp. 1162, 1170 (S.D.Fla.1981); Quinto v. Legal Times of Washington, Inc., 506 F.Supp. 554, 558 (D.D.C.1981); PSC Professional Services Group, Inc. v. American Digital Systems, 555 F.Supp. 788, 791 n. 5 (E.D.Pa.1983); Quinn v. Bowmar Publishing Co., 445 F.Supp. 780, 786 (D.Md.1978); but see Columbia Briargate Co. v. First National Bank, 713 F.2d 1052, 1058-61 (4th Cir.1983). The equitable rationale which underlies the doctrine is that "it is unfair to force an individual to defend a suit brought against him personally in a forum with which his only relevant contacts are acts performed not for his own benefit but for the benefit of his employer." Marine Midland Bank v. Miller, 664 F.2d at 902.

In the present case, there are no allegations to tie Reisch to this forum in a personal capacity. It is uncontroverted that what contacts he may have had with New Mexico related solely to his position with TAI and were conducted entirely within the province of his employment. Under these circumstances and in light of the law of this circuit, the exercise of personal jurisdiction over this Defendant would stretch beyond the bounds of due process. The Defendant Reisch's motion to dismiss will be granted.

TAI has moved to dismiss, inter alia, the Second, Third, and Seventh Causes of Action on the basis that tort theories of liability may not be utilized to recover for purely economic injury. This question of substantive law is, of course, to be resolved by recourse to the law of New Mexico. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965). As the Tenth Circuit has noted, "`the responsibility of federal courts in matters of local law is not to formulate the legal mind of the state, but merely to ascertain and apply it.' Yoder v. Nu-Enamel Corp., 117 F.2d 488, 489 (8th Cir.)." Hardy Salt Co. v. Southern Pacific Transportation Co., 501 F.2d 1156, 1163 (10th Cir.1974).

The New Mexico appellate courts have not addressed the issue. This district has, however, predicted that New Mexico would follow the majority rule and would not allow recovery for purely economic loss under a theory of strict liability. See Garrett v. Joan of Arc Co., Civ. No. 80-344-HB, slip op. at 2-3 (D.N.M. January 24, 1983). The Defendants would have this Court dismiss those causes of action which sound in tort, resonating both in negligence and strict products liability.

The central dichotomy between those courts which have permitted recovery in tort for economic injury and those which have not may be traced to two seminal cases decided in 1965. The Supreme Court of New Jersey opined in Santor v. A and M Karagheusian, 207 A.2d 305 (N.J.1965) that a cause of action under strict...