Bulova Watch Co., Inc. v. K. Hattori & Co., Ltd.
| Decision Date | 12 February 1981 |
| Docket Number | No. 79 C 2543.,79 C 2543. |
| Citation | 508 F. Supp. 1322 |
| Parties | BULOVA WATCH COMPANY, INC., Plaintiff, v. K. HATTORI & CO., LTD., Hideaki Moriya, Jason Segal, Larry Lich, Arthur J. Cohen, Jack Murphy and Ben Waldman, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
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Meyers, Tersigni, Kaufman, Debrot, Feldman & Gray, New York City, Anthony L. Tersigni, Richard N. Gray, New York City, of counsel, for plaintiff.
Whitman & Ransom, New York City, John M. Hadlock, Paul A. Cable, Michael S. Press, Debra A. Armbruster, New York City, of counsel, for defendants.
I. USE OF JUDICIAL NOTICE ....................... 1327
II. FACTS ........................................ 1329
A. Parties ................................... 1329
B. Allegations ............................... 1330
C. Moriya's Crucial Role ..................... 1331
III. JURISDICTION OVER K. HATTORI
& CO., LTD. ............................. 1333
A. Doing Business, N.Y. CPLR 301 ............. 1333
1. The Law ................................ 1333
2. Multinational Operations in General .... 1335
3. Japanese Multinationals in General ..... 1338
4. Japanese Hierarchical Structures ....... 1339
5. Application of Law to Facts ............ 1340
B. Long Arm Jurisdiction, N.Y. CPLR 302 ...... 1345
1. The Law ................................ 1345
2. Application of Law to Facts ............ 1346
IV. JURISDICTION OVER INDIVIDUAL
DEFENDANTS .............................. 1347
A. The Law ................................... 1347
B. Application of Law to Facts ............... 1348
1. Segal .................................. 1348
2. Murphy ................................. 1348
3. Moriya ................................. 1349
4. Waldman ................................ 1349
V. CONCLUSION ................................... 1349
This motion to dismiss for lack of personal jurisdiction (F.R.Civ.P. 12(b)(2)), presents a classic problem in adjudicating claims against a multinational corporation using subsidiaries to penetrate the American market. Under current doctrine, to be subject to personal jurisdiction by a state, the parent must 1) itself be present because it is doing business in the state (N.Y. CPLR 301); or, 2) under a "long arm" concept, have conducted specific activities out of which the cause of action arose either in the state or outside the state with foreseeable substantial effects in the state (N.Y. CPLR 302); in addition, exercise of judicial power over the person of defendant must not offend our notions of fairness. See, e. g., International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945); Restatement (Second) of Conflict of Laws § 27(1)(g)(h) (); Restatement (Second) of Judgments § 8, Comment a (Tent. Draft No. 5, 1978) (where party, inter alia, does business in state or does act in state relationship is "such that the exercise of jurisdiction is reasonable").
Largely for reasons of historical and conceptual development, the doing business concept treats a defendant corporation as if it were present for all purposes in any kind of a suit to the same extent as a real person living and working here would be. The long arm alternative was designed to be used only in limited situations in which an outsider has a transient impact on activities in the state and it applies only to claims arising from that narrow contact.
Multinational activities such as those before us present a factual pattern that sometimes does not quite fit into either of the two tidy conceptual categories reflected in N.Y. CPLR 301 and 302. Here the foreign parent corporation may be considered to be doing business under 301 for limited purposes during the period of penetration of the American market before its subsidiaries have matured to relatively full independence. The implications of this view are that the foreign parent may be deemed to be present for the purpose of expanding into a new market by setting up subsidiaries and dealing with competition, while it may not be doing business for the purposes of day-to-day commercial activity such as dealing in watches, cars or sealing wax — e. g., when a suit is based upon negligent operation of a car operated by an employee of a locally organized subsidiary. Similarly, while not within the strict limits of the 302 long arm provision, the parent's actions might be sufficiently within the CPLR's penumbra so that the combination of 301 and 302 read together covers the particular claims asserted and long arm personal jurisdiction lies. None of this would violate any constitutional requirements.
We do not suggest that the present jurisdictional bases be eliminated — a proposal for the legislature rather than a trial court in any event. Nor do we ignore traditional indicia utilized to measure parent-subsidiary control for jurisdictional purposes. Rather, we note that in this as in so many other areas of the law, stuffing new and complex factual patterns into absolutely rigid legal cubbyholes often results in distortion of the facts. Some give in the categories is desirable lest the law lose touch with the real world.
To any layman it would seem absurd that our courts could not obtain jurisdiction over a billion dollar multinational which is exploiting the critical New York and American markets to keep its home production going at a huge volume and profit. This perception must have a bearing on our evaluation of fairness. The law ignores the common sense of a situation at the peril of becoming irrelevant as an institution.
An apparent growing tendency by the Supreme Court to view jurisdictional bases narrowly in the interest of what it considers to be fairness to defendants is reflected in a few recent cases. Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977); Rush v. Savchuk, 444 U.S. 320, 100 S.Ct. 571, 62 L.Ed.2d 516 (1980), on remand, 290 N.W.2d 633 (Minn.1980); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). Unreasoned extrapolation of such cases can lead to unfairness to plaintiffs who may be denied a natural forum unless the court carefully analyzes the economic and social realities of the "significant contacts between the litigation and the forum." Rush v. Savchuk, 444 U.S. at 329, 100 S.Ct. at 578. Cf. Kamp, Beyond Minimum Contacts: The Supreme Court's New Jurisdictional Theory, 15 Ga.L.Rev. 19 (1980) (); Comment, Federalism, Due Process and Minimum Contacts: World-Wide Volkswagen Corp. v. Woodson, 80 Colum.L.Rev. 1341 (1980) ().
A common sense appraisal of economic relationships is often more useful than prior cases based on situations different in detail. Meat Systems Corp. v. Ben Langel-Mol, Inc., 410 F.Supp. 231, 231-232 (S.D.N.Y.1976), remanded without opinion, 551 F.2d 300 (2d Cir. 1976). We tend to come closer to the mark when we examine a business relationship from the practical viewpoint of businessmen rather than through the distorting lens of a legal conceptual framework established in an earlier era. In the multidimensional complexity of real life a two dimensional straight line provides a misleading boundary. A court cannot simply "isolate each contact of the defendant with New York and say that each such contact does not constitute the doing of business." Potter's Photographic Applications Co. v. Ealing Corporation, 292 F.Supp. 92, 100 (E.D.N.Y.1968). Rather it must look to the "cumulative significance" of all activities of a foreign corporation within the state in order to determine whether the corporation is doing business within the state for jurisdictional purposes. Id. In doing so it must make use of so much of judicial notice as is required to understand general commercial settings and the particular relationships of the parties and their dispute.
Judicial notice may be resorted to on a motion to dismiss for lack of jurisdiction. Fed.R.Evid. 201(f) (); Singleton v. City of New York, 632 F.2d 185, 204 (2d Cir. 1980) (dissent) (); St. Louis Baptist Temple, Inc. v. Federal Deposit Insurance Corp., 605 F.2d 1169, 1172 (10th Cir. 1979) (summary judgment); United States ex rel. McLaughlin v. People of the State of New York, 356 F.Supp. 988, 990 (E.D.N.Y. 1973) (); Fox v. Kane-Miller Corp., 398 F.Supp. 609, 651 (D.Md.1975), aff'd, 542 F.2d 915 (4th Cir. 1976) (); Webb v. Nolan, 361 F.Supp. 418, 420 (M.D.N.C.1972), aff'd, 484 F.Supp. 1049 (4th Cir. 1973) ().
The information that may be noticed where jurisdiction is sought over a multinational is much broader than the narrow form of "adjudicative" fact either "generally known within the territorial jurisdiction" or capable of "determination by resort to sources whose accuracy cannot reasonably be questioned," Fed.R.Evid. 201(a)(b) — e. g., the day of a week of a certain date. The judgments involved in determining questions of jurisdiction such as the one before us involve mixed questions of law and fact. Inextricably intertwined in the decision is a normative judgment of what is fair and reasonable — a question primarily of law rather than an adjudicative fact. Thus the factual issues are closer on a spectrum to legislative facts necessary in interpreting the meaning of law and filling in its interstitial...
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