Coulter v. Sears, Roebuck and Co.

• Decision Date: 13 May 1970
• Docket Number: No. 28282.,28282.
• Citation: 426 F.2d 1315
• Parties: Glenn Earl COULTER and wife, Eldera Coulter, Plaintiffs, v. SEARS, ROEBUCK AND CO., Defendant and Third-Party Plaintiff-Appellant, v. WARWICK ELECTRONICS, INC., Third-Party Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

426 F.2d 1315 (1970)

Glenn Earl COULTER and wife, Eldera Coulter, Plaintiffs, v. SEARS, ROEBUCK AND CO., Defendant and Third-Party Plaintiff-Appellant, v. WARWICK ELECTRONICS, INC., Third-Party Defendant-Appellee.

No. 28282.

United States Court of Appeals, Fifth Circuit.

May 13, 1970.

Donald M. Hunt, Lubbock, Tex., for appellant.

Kenneth Bowlin, Cade & Bowlin, Alton R. Griffin, W. Gordon Dickinson, Crenshaw, Dupree & Milam, Lubbock, Tex., for appellee.

Before RIVES, GEWIN and INGRAHAM, Circuit Judges.

GEWIN, Circuit Judge:

Earl and Eldera Coulter, residents of Texas, purchased a Model 6184 Silvertone Color Console television from Sears, Roebuck and Company in Lubbock, Texas. In February 1967 the television allegedly burst into flames partially destroying their home. The Coulters filed suit against Sears in the Lubbock County District Court seeking damages of $14,991.02. Sears, a New York corporation, removed the action to the United States District Court under the diversity statute. Sears subsequently filed a third-party complaint against the manufacturer of the television, Warwick Electronics, Inc., a Delaware corporation having its principal place of business in Chicago, Illinois. The district court granted Warwick's motion to dismiss the third-party complaint for want of in personam jurisdiction and Sears appeals.¹ We reverse and remand.

Warwick is a major supplier of televisions for Sears and is the only supplier of the model purchased by the Coulters. It is not authorized to do business in Texas and does not maintain a regular place of business in that state. Warwick's contact with the Lone Star State is the presence within the state of a substantial number of its television sets. According to an undisputed affidavit of Sears's senior buyer, Warwick has sold televisions to Sears "for a long time" with knowledge that a large number of them would be shipped to Texas for resale through Sears's stores in that state.²

Cases of this genre present two questions: First, whether the state long-arm statute authorizes the exercise of jurisdiction over the defendant. Second, whether the exercise of jurisdiction, if authorized, would violate the due process clause of the Fourteenth Amendment.

We unhesitatingly conclude that Warwick's activities bring it within the reach of Texas's long-arm. Several recent Fifth Circuit decisions recognize that the scope of the statute is as broad as due process will permit. This court in Eyerly Aircraft Co. v. Killian stated:

We have little difficulty in finding the statutory reach even though the Erie directives from the Texas courts are lacking in delineation and incandescence. The federal courts in diversity cases, however, have on several occasions engaged in rational divination on this question and have always held that article 2031b should be given as broad a reach as due process will permit any "Long Arm" statute to be given. In Atwood Hatcheries v. Heisdorf & Nelson Farms, 5 Cir. 1966, 357 F.2d 847, 852, this Court per Chief Judge Brown wrote: "we now declare what was more hesitatingly suggested in Lone Star and even more guardedly assumed in Jack Tar that `the Texas purpose in enacting article 2031b was to exploit to the maximum the fullest permissible reach under federal constitutional restraints.\'" See also Turner v. Jack Tar Grand Bahama, Ltd., 5 Cir. 1965, 353 F.2d 954, 956; Lone Star Motor Import, Inc. v. Citroen Cars Corp., 5 Cir. 1961, 288 F. 2d 69, 73; Barnes v. Irving Trust Co., S.D. Tex. 1968, 290 F.Supp. 116, 117; Amco Transworld, Inc. v. M/V Bambi, S.D. Tex. 1966, 257 F.Supp. 215, 216-217; cf. Trinity Steel Co., Inc. v. Modern Gas Sales & Service Co., Tex.Civ. App.1965, 392 S.W.2d 861 (writ ref\'d n. r. e.).³

These cases control our decision in the absence of intervening Texas court decisions indicating the atrophy of that state's long-arm.⁴ The remaining consideration is whether the due process clause will permit the exercise of in personam jurisdiction over Warwick.

The reservoir of state jurisdictional power over nonresidents has swollen tremendously in recent years. The receding boundaries of due process reflect the fundamental change in the national economy since the days of Pennoyer v. Neff.⁵ As the Supreme Court observed in McGee v. International Life Insurance Co.:

Looking back over this long history of litigation a trend is clearly discernible toward expanding the permissible scope of state jurisdiction over foreign corporations and other nonresidents. In part this is attributable to the fundamental transformation of our national economy over the years. Today many commercial transactions touch two or more states and may involve parties separated by the full continent. With this increasing nationalization of commerce has come a great increase in the amount of business conducted by mail across state lines. At the same time modern transportation and communication have made it much less burdensome for a party sued to defend himself in a state where he engages in economic activity.⁶

The existence of the trend should not be interpreted to herald the "eventual demise of all restrictions on the personal jurisdiction of state courts."⁷ "The island of Tobago still may not impose its will upon the whole world."⁸ The due process clause continues to define the limits of state jurisdictional power over nonresidents.

The due process touchstone announced by the Supreme Court almost twenty-five years ago in International Shoe Co. v. Washington, allows states to exercise jurisdiction over nonresidents who have such "minimum contacts" with the state "that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'"⁹ The updated version of this standard, appearing in Hanson v. Denckla, requires "some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protection of its laws."¹⁰ A careful examination of recent cases applying these guidelines to products liability cases convinces us that the exercise of jurisdiction over Warwick by Texas is not violative of due process of law.

Our decision is strongly influenced by Judge Goldberg's excellent opinion in Eyerly Aircraft Co. v. Killian.¹¹ In that case the court was called upon to decide whether due process prevented Texas from exercising jurisdiction over a nonresident manufacturer of an allegedly defective amusement ride, called a Rock-O-Plane, whose operation caused a personal injury in Texas. The manufacturer, an Oregon corporation, had sold the ride to an itinerant amusement company almost twenty years before the accident in Texas. In discussing due process limitations on the exercise of jurisdiction over nonresident manufacturers, this court stated:

Where a foreign corporation does substantial business within a state, that state may assert in personam jurisdiction over the corporation to enforce a cause of action arising out of a tort committed in part within its boundaries. Smyth v. Twin State Improvement Corp., 1951, 116 Vt. 569, 80 A.2d 664, 25 A.L.R.2d 1193. Thus where a corporation with substantial contacts within state X ships into that state a product which it has manufactured in State Y and an injury occurs in state X because of an alleged defect in the product, the corporation may constitutionally be called upon to defend a products liability suit brought in state X where the injury occurred. Deveny v. Rheem Mfg. Co., 2 Cir. 1963, 319 F.2d 124; Shealy v. Challenger Mfg. Co., 4 Cir. 1962, 304 F.2d 102; cf. Carter v. American Bus Lines, Inc., D.Neb. 1959, 169 F.Supp. 460. This result also obtains where the manufacturer has elected to distribute his wares through independent wholesalers instead of through its own corporate apparatus so that it is only very indirectly responsible for the product reaching the injured consumer. Florio v. Powder Power Tool Corp., 3 Cir. 1957, 248 F.2d 367; Etzler v. Dille and McGuire Mfg. Co., W.D. Va. 1965, 249 F.Supp. 1. The present trend is to take the next logical step and hold that a corporation is answerable where it introduces its product into the stream of interstate commerce if it had reason to know or expect that its product would be brought into the state where the injury occurred:

"Where a defendant does business of such a volume, or with such a pattern of product distribution, that he should reasonably anticipate that his product may be ultimately used in any state, he has done the act required for the exercise of jurisdiction by the state where the injured user resides.

* * * * * *

"When a manufacturer voluntarily chooses to sell his product in a way in which it will be resold from dealer to dealer, transferred from hand to hand and transported from state to state, he cannot reasonably claim that he is surprised at being held to answer in any state for the damage the product causes. Nor can he deny the substantial interest of the injured person\'s state in providing a convenient forum for its citizens." Keckler v. Brookwood Country Club, N.D. Ill. 1965, 248 F.Supp. 645, 648-649 (Emphasis in original).¹²

This court's decision in Eyerly sustaining Texas's exercise of jurisdiction against constitutional attack was based on two grounds: First, the defendant had introduced the Rock-O-Plane into the stream of interstate commerce with reason to know or expect that the ride would eventually be brought into Texas. Second, Eyerly had direct contacts with Texas in the form of substantial and continuous business relations with Texas concerns. While the latter ground is absent in the instant case, we think the former is sufficient to satisfy due process requirements.

The facts in the instant case provide a much stronger base for application of the stream of commerce theory than those in Eyerly. Warwick's contacts with Texas through the stream of interstate commerce are far more direct, immediate and substantial than those...