Berk v. Gordon Johnson Company

• Decision Date: 19 December 1962
• Docket Number: Civ. A. No. 22684.
• Citation: 212 F. Supp. 365
• Parties: Lawrence BERK and Eugene Brownstein, doing business as Morris Poultry Company, Plaintiffs, v. GORDON JOHNSON COMPANY, a Missouri corporation, Defendant.
• Court: U.S. District Court — Western District of Michigan

212 F. Supp. 365

Lawrence BERK and Eugene Brownstein, doing business as Morris Poultry Company, Plaintiffs, v. GORDON JOHNSON COMPANY, a Missouri corporation, Defendant.

Civ. A. No. 22684.

United States District Court E. D. Michigan, S. D.

December 19, 1962.

Leopold J. Snyder, Bernard J. Fieger, Snyder & Fieger, Detroit, Mich., for plaintiffs.

Lucian Lane, Tucker, Murphy, Wilson, Lane & Kelly, Kansas City, Mo., Harold Mountain, Jr., Freud, Markus, Slavin & Mountain, Detroit, Mich., for defendant.

FREEMAN, District Judge.

This is an action for breach of warranty arising out of the purchase of certain chicken processing equipment and is now before the Court on the motion of defendant, a foreign corporation, to quash service of process. The grounds of the motion are that defendant's activities in Michigan did not establish a sufficient nexus with that State to render it amenable to suit by plaintiffs and that if Michigan law does hold defendant's activities sufficient, such state law is in contravention of the due process clause of the Fourteenth Amendment and the Commerce Clause of the Federal Constitution.

The plaintiffs, residents of Michigan, are in the business of butchering and merchandising poultry at the wholesale level solely for sale to kosher poultry markets. The defendant, a Missouri corporation, is engaged in the business of manufacturing and selling equipment used in processing poultry.

It is admitted by plaintiffs that the defendant is not registered to do business in Michigan, has no registered agent in Michigan and maintains no office in said State.

Plaintiffs' claim, according to their affidavit, stems from the following events. In the spring of 1961, Harold Flowers, one of defendant's salesmen who resides in Ohio and whose territory consists of several states, including Michigan, contacted the plaintiffs for the purpose of selling them automatic chicken processing equipment especially designed for kosher purposes. Flowers examined the processes being used by the plaintiffs and their employees, discussed extensively with plaintiffs the type of equipment they would need, arranged for plaintiff, Brownstein, to go to St. Louis, Missouri, to examine a kosher processing plant using defendant's equipment, and negotiated with plaintiffs all the terms of purchase, including the warranties that were given when the purchase order was accepted by the defendant at its Missouri home office. Defendant shipped the ordered equipment to Detroit from Kansas City, Missouri, and its employees installed and supervised the installation of same, during which time Flowers was present and made suggestions relating to the method of installation. After the equipment had been installed, plaintiffs notified the defendant that it was not working properly, whereupon the defendant on several occasions sent servicemen to Detroit to confer with Flowers and plaintiffs to correct the difficulties of which the latter were complaining. The plaintiffs, at Flowers's suggestion, purchased additional equipment to eliminate the difficulties involved. However, the plaintiffs' problems persisted and defendant sent Messrs. Glanville and Woods to join Flowers at a meeting with plaintiffs in Detroit. Additional suggestions were made by these gentlemen at such meeting, and acting thereon, the plaintiffs purchased more equipment that was installed under the observation of Glanville and Flowers. Further arrangements concerning the purchase terms were negotiated at that meeting. This additional equipment also failed to correct the situation and, consequently, further discussion followed between the plaintiffs and the defendant's officials, including Flowers, but such discussion did not result in eliminating the difficulties to plaintiffs' satisfaction.

In support of its motion, the defendant has filed affidavits which state that it is a Missouri corporation with its principal place of business in such State; that it has no offices or resident agent in Michigan; that its name is not on any office and is not listed in any Michigan telephone directory; that its sales consist of products shipped in interstate commerce as a result of orders sent through such commerce to Missouri, and no agent who procures such orders is authorized to do anything but solicit and transmit them to Missouri for acceptance or rejection by the home office; that its agents either install or supervise the installation of its products as an essential and inseparable part of the sale; that the service of the summons was made on Flowers, a traveling salesman who is a resident of Ohio and whose authority is limited to soliciting orders from prospective customers in the States of Michigan, Tennessee, Kentucky, Ohio, Indiana, and parts of West Virginia and Illinois; and that in the fiscal year of April 1, 1961, to March 31, 1962, apart from the sale to plaintiffs, which is the subject of this action, it had only three other sales of its equipment or products in Michigan amounting to $370.42, $54.34 and $105.60, respectively, which were sales resulting from orders sent to the home office in Missouri for acceptance or rejection.

Plaintiffs in their brief state that defendant maintained supplies with plaintiffs and others in Michigan and still maintains such supplies with others for sale to users and owners of its equipment. However, since this statement is not supported by any affidavit and is denied in one of the defendant's affidavits, it will not be considered in disposing of this motion.

The parties agree that service of process was in the manner required by Rule 4(d) (7) of the Federal Rules of Civil Procedure and also agree as to the applicability of state and federal law to the issues involved in the question of when a state may exercise in personam jurisdiction over a foreign corporation.

State law governs the question of whether a foreign corporation is subject to its in personam jurisdiction provided such state law is within federal Constitutional requirements, which requirements involve a question to be determined by federal law.

In Dolce v. Atchison, Topeka & Santa Fe Railway Co., D.C., 23 F.R.D. 240, p. 242, this Court said:

"This court has previously held that under Rule 4(d) resort must be had to applicable state law to determine whether a foreign corporation is subject to service. Singleton v. Atlantic Coast Line R. Co., D.C.E.D. Mich.S.D.1956, 20 F.R.D. 15. If it is determined that a particular foreign corporation is subject to service under state law, then it becomes necessary to examine federal law to determine whether assumption of jurisdiction by this court over that foreign corporation will be in accordance with the constitutional requirements of due process of law outlined in International Shoe Co. v. State of Washington, 1945, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, the leading case on this subject."

The instant case is very similar to that of Harvey's Sons Manufacturing Co. v. Sterling Materials Co., 247 Mich. 317, 225 N.W. 538. In that case the defendant, a Canadian corporation which did not maintain either an office or warehouse or stock in Michigan, sold a quantity of roofing material to the plaintiff through a commissioned salesman subject to the confirmation of the defendant. The material was forwarded to the plaintiff, who was dissatisfied with it and complained by mail to the defendant who replied that it was sending one of its representatives to call. When the defendant's representative called, he was served with a writ of summons in a breach of contract suit arising out of the sale of the roofing equipment. Under these facts, the Michigan Supreme Court held that this was valid service and that such service did not violate either the due process or commerce clauses since defendant was doing business in Michigan.

In the case of Malooly v. York Heating & Ventilating Corp., 270 Mich. 240, 258 N.W. 622, appeal dismissed 296 U.S. 533, 56 S.Ct. 92, 80 L.Ed. 379, the Court held that where the defendant foreign corporation, through its Detroit sales representative who maintained a Detroit office at his expense, solicited an order from the plaintiff which was shipped in interstate commerce, and the sales representative supervised the installation of the equipment and undertook to correct the defects of which plaintiff complained, service of process on such sales representative was valid. The Court, at p. 249, 258 N.W. at p. 624, stated:

"The record does not disclose any change in York's manner of doing business in Michigan subsequent to the installation of the equipment, and it is a reasonable inference that its business was being conducted in the same way when process was served upon Mr. McConnor. The limitations described do not account for York's actions in connection with the installation of equipment. The agent was here, not only for the purpose of securing business for his principal, but he was available to serve his employers in connection with the installation and operation of sold equipment."

In the instant case, Flowers was not a resident sales representative. However, this Court agrees with...