Caso v. Lafayette Radio Electronics Corporation, 6723.

• Decision Date: 27 December 1966
• Docket Number: No. 6723.,6723.
• Parties: Adolph CASO, Plaintiff, Appellant, v. LAFAYETTE RADIO ELECTRONICS CORPORATION, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

370 F.2d 707 (1966)

Adolph CASO, Plaintiff, Appellant, v. LAFAYETTE RADIO ELECTRONICS CORPORATION, Defendant, Appellee.

No. 6723.

United States Court of Appeals First Circuit.

December 27, 1966.

Irving Marmer, Boston, Mass., for appellant.

Donald J. Wood, Boston, Mass., with whom Haussermann, Davison & Shattuck, Boston, Mass., was on the brief, for appellee.

Before ALDRICH, Chief Judge, McENTEE and COFFIN, Circuit Judges.

COFFIN, Circuit Judge.

This is an appeal from an order of the United States District Court for the District of Massachusetts granting the defendant's motion to dismiss for lack of jurisdiction. The question presented is whether the court erred in ruling that the defendant corporation was not "doing business" in Massachusetts sufficiently to confer personal jurisdiction to dispose of a cause of action arising elsewhere and being wholly unrelated to defendant's activities in Massachusetts.

The plaintiff, a citizen of Massachusetts, alleged in his complaint that the defendant, a New York corporation having its principal place of business at Syosset, Long Island, New York, had broken a contract under which the plaintiff was to operate a "Lafayette Radio Electronics Associate Store" in Vicenza, Italy, and was to be the defendant's exclusive Italian selling agent. He also alleged deceit by the defendant in various representations that induced him to undertake the Italian agency. Federal jurisdiction is founded solely on diversity of citizenship. The complaint and summons were served on one Joseph Dansereau, manager of the "Lafayette Radio" retail store in Boston, Massachusetts. Dansereau was the principal witness at the hearing on the motion to dismiss, and his testimony was substantially uncontradicted.

The district court found the following facts: The defendant, Lafayette Radio Electronics Corporation, is engaged in selling at wholesale and retail electronic equipment and parts, and various related items. Its general offices and mail order department are located in Syosset, and it owns directly several retail stores in New York City. It has, at least in its own name, no place of business in Massachusetts; it employs no residents of Massachusetts; and it has no property, tangible or intangible, located in Massachusetts. The retail store of which Dansereau is manager is owned by Lafayette Radio Corporation of Massachusetts, a Massachusetts corporation wholly owned by the defendant and sharing the defendant's directors and officers (except for the statutory clerk required to be a resident of Massachusetts). Dansereau supervises the selling and purchasing policies of the Boston store, deposits its receipts in the corporation's account with a Boston bank, and approves bills before transmitting them to the corporation's general offices for payment. The checks, as well as the corporation's other books and accounts, are kept at its offices in New York and New Jersey, and all disbursements (including the salaries of Dansereau and the other employees) are made from there by checks drawn on the Boston account. Dansereau testified that he did not know who was in charge of advertising for the Boston store, but assumed that it was handled by the other officers of the corporation.

Lafayette of Massachusetts is engaged in the retail sale of the same sorts of electronic products sold by the defendant, including some bearing the Lafayette "house brand". It purchases its inventory partly from the defendant, partly from other suppliers, and pays the defendant on the same basis as the others. It maintains a repair department, and Dansereau testified that he would normally undertake to repair or replace equipment bearing the Lafayette name, wherever purchased, but that he would not feel obliged to do so except "for customer's service and good will". The Boston store maintains a stock of the defendant's mail-order catalogue for consultation in the store and distribution over the counter to customers. The catalogue contains an order form bearing the defendant's New York address. Lafayette of Massachusetts does not fill mail orders, and it forwards any it may receive to the defendant's mail-order center in New York. Dansereau receives no commission or credit for any merchandise sold by mail.¹

On these facts the district court concluded that the retail business of Lafayette of Massachusetts was not controlled by the defendant, and that Lafayette of Massachusetts was not the defendant's agent in fact, so that the defendant was not "doing business" in Massachusetts for the purposes of personal jurisdiction. It also found that in distributing the catalogues Lafayette of Massachusetts was the defendant's agent for the solicitation of business in Massachusetts, but it ruled that under state law "mere solicitation" would not support jurisdiction unless the cause of action arose from the solicitation.

I

We agree with the district court. We have consistently held that wherever federal jurisdiction is sought to be conferred by service in the manner prescribed by state law, see Fed.R.Civ.P. 4(d) (7), the federal court must look first to state law to decide whether the attempt has been effective. Pulson v. American Rolling Mill Co., 1 Cir. 1948, 170 F.2d 193. See also Waltham Precision Inst. Co. v. McDonnell Aircraft Corp., 1 Cir., 1962, 310 F.2d 20; Sanders Associates, Inc. v. Galion Iron Works, 1 Cir., 1962, 304 F.2d 915.

We would not, however, be understood as reaffirming these precedents without being aware of recent currents in the law which challenge old assumptions. Byrd v. Blue Ridge Elec. Co-op., 1958, 356 U.S. 525, 78 S.Ct. 893, 2 L.Ed. 2d 953, and Hanna v. Plumer, 1965, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8, demonstrate that "federal" policy may compel disregard of contrary state law in a diversity case in such matters as submission of particular issues to a jury and rules governing service of process. And there has been the penetrating dialogue in the Second Circuit on the priority of a state as opposed to a federal rule regarding subjection of a foreign corporation to personal jurisdiction within a district. See Arrowsmith v. United Press International, 2 Cir., 1963, 320 F.2d 219, 6 A.L.R.3d 1072; Jaftex Corp. v. Randolph Mills, Inc., 2 Cir., 1960, 282 F.2d 508.

Without pretending to enlarge upon the extensive discussion in Arrowsmith, we think it appropriate to reiterate that we see no compelling federal consideration to support a departure from the approach of Pulson in cases like the present one, whether we canvass rules, statutes, or less concretely embodied policies. We read rule 4(d) (7)² as applying only to the "manner" of service and as shedding no light on the question whether a defendant is subject to service in any manner. Section 1391 of the Judicial Code³ seems to us to present the twin difficulties of being historically directed to the question of venue rather than jurisdiction and affording no guidance to the decision of what constitutes "doing business". Finally, we observe that the historic primary function of the diversity jurisdiction — to provide a "neutral" forum for the out-of-state litigant who fears that the state court may be unduly, if unconsciously and inarticulately, solicitous for the interests of its own citizens — hardly supports a liberal rule of jurisdiction where, as here, the plaintiff is a citizen of the forum state seeking to enforce a substantive right arising solely from state law. In short, where it appears, as we think it does here, that the state court would not take jurisdiction over the foreign defendant, we would not be justified in finding jurisdiction in the district court either by application of a "federal" rule of jurisdiction or by a creative attitude as to what the state law may be developing to be.

II

There is no question that Massachusetts could, if it chose, exercise jurisdiction here. Though the defendant's activities in a state are minimal, it does not violate due process to exercise jurisdiction so long as the activities show sufficient "contact" with the state so that it is reasonable to require the defendant to answer a suit there. International Shoe Co. v. State of Washington, 1945, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95; McGee v. International Life Ins. Co., 1957, 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223. Here it can be inferred that the defendant obtains a substantial volume of sales through the twin conduits of the Boston store and the mail order catalogues distributed by it. With respect to transactions arising from the activities of Lafayette of Massachusetts it seems clear that the defendant has enough impact on the commerce of Massachusetts to warrant the extension of jurisdiction. Nevertheless, as we have noted before, the question is whether Massachusetts would exercise jurisdiction wherever it could, and the Supreme Judicial Court has generally been conservative in this respect. Waltham Precision Inst. Co. v. McDonnell Aircraft Corp., supra, 310 F.2d at 23.

In Thurman v. Chicago, M. & St. P. Ry., 1926, 254 Mass. 569, 151 N.E. 63, 46 A.L.R. 563, as here, the plaintiff attempted service under Mass. G.L. c. 223, § 38.⁴ There it was held that despite the express reference to "solicitation", the statute would not be interpreted as conferring jurisdiction where the defendant's only contact with Massachusetts was an "agent" whose sole function was to solicit passenger and freight traffic for the defendant railroad's interstate business and the cause of action did not arise out of his activities, because such a broad interpretation would violate constitutional restrictions on the state's jurisdiction. The court specifically left open the question whether solicitation would be a sufficient basis when the cause of action grew out of the business solicited, holding only that something more than solicitation was necessary when the cause was transitory.

In two later cases the Supreme Judicial Court has questioned the constitutional...