Beaty v. MS Steel Company

• Decision Date: 23 August 1968
• Docket Number: No. 12176,12177.,12176
• Parties: Melvin F. BEATY, to his own use and to the use of United States Fidelity and Guaranty Company, a body corporate, Appellants, v. M. S. STEEL COMPANY, Inc., a body corporate, Appellee. Raymond A. GRAINGER, to his own use and to the use of United States Fidelity and Guaranty Company, a body corporate, Appellants, v. M. S. STEEL COMPANY, Inc., a body corporate, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

401 F.2d 157 (1968)

Melvin F. BEATY, to his own use and to the use of United States Fidelity and Guaranty Company, a body corporate, Appellants, v. M. S. STEEL COMPANY, Inc., a body corporate, Appellee.

Raymond A. GRAINGER, to his own use and to the use of United States Fidelity and Guaranty Company, a body corporate, Appellants, v. M. S. STEEL COMPANY, Inc., a body corporate, Appellee.

Nos. 12176, 12177.

United States Court of Appeals Fourth Circuit.

Argued June 20, 1968.

Decided August 23, 1968.

Certiorari Denied January 20, 1969.

John P. Wade and William H. Hicks, Baltimore, Md. (Sidney Blum, Baltimore, Md., on brief) for appellants.

Hamilton O'Dunne, Baltimore, Md. (Patrick A. O'Doherty, Baltimore, Md., on brief) for appellee.

Before SOBELOFF, WINTER and BUTZNER, Circuit Judges.

Certiorari Denied January 20, 1969. See 89 S.Ct. 686.

SOBELOFF, Circuit Judge:

The question to be decided in this diversity action brought by two injured Maryland iron workers is whether a federal district court, sitting in Maryland, may in the circumstances of this case entertain in personam jurisdiction over the defendant, an Alabama steel manufacturer. The District Court dismissed for want of jurisdiction, and we affirm on that basis.

Plaintiffs, who were injured while working on bar joists at the Bethlehem Steel Company, Sparrows Point, Maryland, allege that their injuries resulted from defects in the joists, which had been negligently manufactured and welded at defendant's plant in Fort Payne, Alabama. The purportedly defective joists were ordered over the telephone by a jobber in Boston, Massachusetts, and were shipped pre-paid from Alabama to a consignee in Maryland.

Defendant's uncontradicted affidavit states that it is a corporation organized and operating under the laws of Alabama, that it is not licensed to do business in Maryland, and that, except for this one shipment into the state, it has not transacted any business there. Although the plaintiffs alleged in the jurisdictional statement of their complaint that the defendant is "doing business" in Maryland, no evidence of any kind was offered in support of this assertion.¹ Thus, we must assume, as did the District Court, that the shipment of allegedly defective bar joists was defendant's single contact with the State of Maryland.

While plaintiffs-appellants urge upon us questions of constitutional dimension, we do not reach these issue unless a federal statute or a state statute or rule of court authorizes an assertion of jurisdiction over this out-of-state defendant. Rule 4(e) Fed.R.Civ.Proc. No statute of the United States empowers the District Court to exercise personal jurisdiction over the defendant on the facts of this case. Thus, our inquiry must be directed to the statutes and rules of Maryland, and a plain reading of that state's long-arm statute² reveals that the legislature has expressly declined to permit its courts to exercise jurisdiction in this situation.

Modeled upon, but more restrictive than, the Uniform Interstate and International Procedure Act, 9B U.L.A. 307-15 (1966 ed.), the Maryland statute empowers a court to exercise personal jurisdiction over a person or corporation:

"causing tortious injury in this State by an act or omission outside the State if he regularly does or solicits business, engages in any other persistent course of conduct in this State or derives substantial revenue from food or services used or consumed in this State * * *."

Art. 75 § 96(a) (4) Maryland Code Ann. (Supp.1965).

This language was drafted several years after Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761 (1961), upon which plaintiffs here rely heavily. In Gray, the Illinois court interpreted that state's long-arm statute to cover a non-resident defendant who had no connection with Illinois except that it had acted negligently out of state, causing injury in the state. The Illinois statute provided that in personam jurisdiction may be asserted over any person who "commits a tortious act" within the state. It was with knowledge of the Gray resolution of the ambiguity inherent in the phrase "tortious act" that the draftsmen of the Uniform Act, and derivatively the Maryland legislature, explicitly differentiated between in-state and out-of-state conduct. Thus both the Uniform Act and the Maryland law provide in subsection (a) (3) that a person may be subject to in personam jurisdiction if he "causes tortious injury in this State by an act or omission in this State." This is followed by the previously quoted section dealing with out-of-state conduct causing injury in the state and requiring for the exercise of jurisdiction some other reasonable connection between the state and the defendant besides the single out-of-state act. This formula was presumably devised to obviate any possible due process objections.³ Since the Illinois statute did not require an independent connection between defendant and the state and since that is the crucial element in this case, it is abundantly clear that plaintiffs' reliance upon the Gray decision is altogether misplaced.

In the case at bar, the defendant lacks the statutorily prescribed independent connection with the state upon which the Maryland legislature has premised jurisdiction. The defendant does not regularly do or solicit business in Maryland, nor does it engage in any other persistent course of conduct there. Whether the "substantial revenue" provision could be satisfied by this single transaction is irrelevant since the funds were for steel joists not for "food or services used or consumed in this State."

For reasons known best to its legislators, Maryland restrictively modified the Uniform Act which would permit the exercise of jurisdiction over an out-of-state tortfeasor who "derives substantial revenue from goods used or consumed or services rendered in this state." (Emphasis supplied.) That Maryland's change from all goods to foods alone was not inadvertent is demonstrated by a similar alteration in another section of the Act. Where the Uniform Act would exert jurisdiction over an out-of-stater "contracting to supply services or things in this State," Maryland's law deletes the words "or things" and makes the section applicable only to persons "contracting to supply services in this State." Art. 75 § 96(a) (2) Maryland Code Ann. (Supp. 1965). As the author of the definitive study of the Maryland long-arm statute observes,

"Because of the omission, the Maryland resident who is injured by defective merchandise shipped into the state by a foreign manufacturer or who suffers damages because of the failure of such manufacturer to carry out his contractual obligation may be deprived of the opportunity of using a local forum." Auerbach, The "Long Arm" Comes to Maryland, 26 Maryland Law Review 13, 18 (1966).

As earlier noted, whether or not the local resident is so deprived depends on the existence of a substantial or continuing relationship between the defendant and the state. Since in this case the requisite relationship is absent, Maryland courts have no in personam jurisdiction over the present defendant.

Rather than dispute the District Court's clearly correct interpretation of the Maryland long-arm statute, the plaintiffs put their reliance on St. Clair v. Righter, 250 F.Supp. 148 (W.D.Va.1966), a case that was not appealed. There, a defamation originating beyond the borders of Virginia was mailed into that state by a defendant having no other connection with the state. Although Virginia has a long-arm statute identical to the Uniform Act., the District Court held that it could properly subject defendant to in personam jurisdiction. After specifically recognizing that the defendant did not fall within any provision of the long-arm statute, the court reasoned that since due process would permit such an exercise of power, the court sua sponte could exercise jurisdiction over the defendant. The court stated:

"If we can imagine the outer limit of due process as the circumference of a circle and the outer limit of jurisdiction which has been authorized by a state statute as a much smaller concentric circle, then there is an area between the circumferences of the inner and outer circles where the state has not been expressly authorized to assert jurisdiction but which, nevertheless, is a part of the state\'s inherent jurisdictional power. So * * * even though the long-arm statute has not in words sanctioned an assumption of jurisdiction in this case, it is within this court\'s power to assert jurisdiction over these defendants providing that this would not run afoul of the United States

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