Damon Coats, Inc. v. Munsingwear, Inc.

• Decision Date: 20 April 1977
• Docket Number: Civ. A. No. 76-2700.
• Parties: DAMON COATS, INC. v. MUNSINGWEAR, INC.
• Court: U.S. District Court — Eastern District of Pennsylvania

431 F. Supp. 1303

DAMON COATS, INC. v. MUNSINGWEAR, INC.

Civ. A. No. 76-2700.

United States District Court, E. D. Pennsylvania.

April 20, 1977.

COPYRIGHT MATERIAL OMITTED

David N. Bressler, Philadelphia, Pa., for plaintiff.

P. M. Hammett, P. S. Greenberg, Philadelphia, Pa., for defendant.

OPINION AND ORDER

TROUTMAN, District Judge.

This is a diversity action in which plaintiff Damon Coats, Inc. (Damon) seeks damages for an alleged breach of sales contracts by defendant Munsingwear, Inc. (Munsingwear). Damon is incorporated in New York with its principal place of business in New Jersey. Munsingwear is incorporated in Delaware with its principal place of business in Minnesota, and the amount in controversy exceeds $10,000.00. Jurisdiction is based upon 28 U.S.C. § 1332.

Munsingwear has moved to dismiss for lack of jurisdiction of the person, improper venue and insufficient service of process, pursuant to F.R.C.P. 12(2), (3) and (5).

JURISDICTION OF THE PERSON

In determining whether this Court has jurisdiction of Munsingwear's person we apply Pennsylvania law. Gorso v. Bell Equipment Corporation, 476 F.2d 1216 (3d Cir. 1973). The applicable statute is 42 Pa.C.S.A. § 8302, which deals with nonqualified foreign corporations:¹

"§ 8302. Nonqualified foreign corporations

"(a) General rule. — Any foreign corporation which shall have done any business in this Commonwealth without procuring a certificate of authority to do so from the Department of State as required by statute, shall be conclusively presumed to have designated the Department of State as its true and lawful attorney authorized to accept, on its behalf, service of process in any action arising within this Commonwealth. Service of process shall be made in the manner provided by section 8307 of this title (relating to procedure for service of process)."

To find jurisdiction of the person, we must determine that Munsingwear has "done business" in the Commonwealth. "Doing business" is defined in 42 Pa.C.S.A. § 8309:

"§ 8309. Acts affecting jurisdiction

"(a) General rule. — Any of the following shall constitute `doing business' for the purposes of this chapter:

"(1) The doing by any person in this Commonwealth of a series of similar acts for the purpose of thereby realizing pecuniary benefit or otherwise accomplishing an object.

"(2) The doing of a single act in this Commonwealth for the purpose of thereby realizing pecuniary benefit or otherwise accomplishing an object with the intention of initiating a series of such acts.

"(3) The shipping of merchandise directly or indirectly into or through this Commonwealth.

"(4) The engaging in any business or profession within this Commonwealth, whether or not such business requires license or approval by the Commonwealth or any of its agencies.

"(5) The ownership, use or possession of any real property situate within this Commonwealth."

Munsingwear contends that it does very scant business in Pennsylvania, having several salesmen in the Commonwealth who solicit orders but cannot make contracts binding on Munsingwear. It argues that the present cause of action concerns garments manufactured in New Jersey for shipment to Minnesota. The cause of action in no way arose in Pennsylvania and is unrelated to Munsingwear's activities in Pennsylvania.

In this regard, Myers v. Mooney Aircraft, Inc., 429 Pa. 177, 181, n. 5, 240 A.2d 505 (1967) held that it is only necessary that "the `action arise' in Pennsylvania". The Third Circuit has held this language to mean "nothing more than that the cause of action is filed in Pennsylvania". Siders v. Upper Mississippi Towing Corporation, 423 F.2d 535, 537, n. 3 (3d Cir. 1970). This case has been consistently followed² with one possible exception³. As Judge Fullam stated in Arnstein v. Manufacturing Chemists Association, Inc., 414 F.Supp. 12, 14 (E.D. Pa.1976), "While this interpretation has not been universally acclaimed * * * it is controlling in this case."

This action having been filed in Pennsylvania, Munsingwear is subject to personal jurisdiction in Pennsylvania if it has done business in the Commonwealth. Munsingwear admits that its garments are sold in many stores "including certain stores located within the Commonwealth of Pennsylvania". (Affidavit of W. James Winspear, p. 2, ¶ 2.) This conduct involves shipping garments into the Commonwealth in a manner consistent with 42 Pa.C.S.A. § 8309(a)(3) which declares that "the shipping of merchandise directly or indirectly into or through this Commonwealth" is "doing business" to an extent sufficient to give rise to in personam jurisdiction.

In Glen Knit Industries, LTD. v. E. F. Timme & Son, Inc., 384 F.Supp. 1176 (E.D. Pa.1974) the Court held that:

"* * * Defendant does not deny that from time to time it has made shipments to persons located in Pennsylvania * * Hence, for the purposes of the long-arm statute, it has `done business' within the Commonwealth." Id. at 1177.

Crucible, Inc. v. Stora Kopparbergs Bergslags AB, 403 F.Supp. 9 (W.D.Pa.1975) held that shipment of goods into Pennsylvania by defendant's wholly-owned subsidiary constituted "doing business" under 42 Pa.C. S.A. § 8309(a)(3). The Court noted that goods were shipped into the Commonwealth with the defendant's knowledge and guidance. Under such circumstances, the Court reasoned, if personal jurisdiction were not found to exist, a foreign corporation could market its products in the Commonwealth, profit from so doing and yet remain immune from suit in the Pennsylvania courts.

In Columbia Metal Culvert Co., Inc. v. Kaiser Industries Corp., 526 F.2d 724 (3d Cir. 1975), defendant directed a codefendant to ship merchandise to a construction site in Pennsylvania. This, the Third Circuit said, constituted "shipping of merchandise * * indirectly" within the purview of the statute.

Defendant relies on Proctor & Schwartz, Inc. v. Cleveland Lumber Co., 228 Pa.Super. 12, 323 A.2d 11 (1974). That case issued the following guidelines in determining whether or not a defendant has established sufficient "minimum contracts" to render it subject to an in personam judgment:

"* * * First, the defendant must have purposefully availed itself of the privilege of acting within the forum state thus invoking the benefits and protections of its laws * * * Secondly, the cause of action must arise from defendant's activities within the forum state. * * * Lastly, the acts of the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over it reasonable." Id. at 19, 323 A.2d at 15.

The Court expanded the second requirement as follows:

"The second analytical step requires only that the cause of action arise from the defendant's activities within the forum state. The mere fact that the defendant availed itself of the privilege of doing business in Pennsylvania will not support a cause of action which is unrelated to the defendant's activities in the state." Id. at 20, 323 A.2d at 15.

This case seems to contradict Myers v. Mooney, supra, but is actually distinguishable. In Myers, the defendant was represented by a sales agent in Pennsylvania and advertised its distributors under defendant's name. In Proctor, the defendant had no agents, representatives or employees in Pennsylvania; had no employees, officers or other individuals representing defendant in Pennsylvania for business purposes; and had no business contacts in Pennsylvania other than the matter sued upon. Under those circumstances, 42 Pa.C. S.A. § 8309(a), which lists specific examples of "doing business" in Pennsylvania, does not apply, and reference to the catchall provisions of 42 Pa.C.S.A. § 8309(b) is required:

"(b) Exercise of full constitutional power over foreign corporations. — In addition to the provisions of subsection (a) of this section the jurisdiction and venue of courts of the Commonwealth shall extend to all foreign corporations and the powers exercised by them to the fullest extent allowed under the Constitution of the United States."

Thus, the combined effect of Myers and Proctor is that a plaintiff who cannot rely on one of the five specific areas of "doing business" under Section 8309(a) must rely on the general provisions of Section 8309(b) and must sue on some matter relating to defendant's activities in the Commonwealth to establish jurisdiction over defendant's person.⁴ Here, Munsingwear has engaged in shipment of goods and Section 8309(a) is satisfied. Thus, according to the Myers and Siders cases, it is not necessary that the cause of action relate to Munsingwear's activities within the Commonwealth.

The case of Bork v. Mills, 458 Pa. 228, 329 A.2d 247 (1974) is also of no help to Munsingwear. That case held that a plaintiff has to show that defendant's activities within Pennsylvania were continuous and substantial if the plaintiff's cause of action is not related to defendant's activity in Pennsylvania. In the case at bar, Munsingwear satisfies that test; clearly its shipment of garments into Pennsylvania has been substantial and continuous, not sporadic or isolated.

Munsingwear also contends that if the Pennsylvania statute does confer personal jurisdiction under these circumstances then it violates the Due Process Clause of the Constitution. However, the Supreme Court, in the case of International Shoe Company v. Washington, 326 U.S. 310, 318, 66 S.Ct. 154, 159, 90 L.Ed. 95 (1945) said "there have been instances in which the continuous corporate operations within a state were thought so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities." The Bork case noted that when a cause of action is not related to defendant's activities in the Commonwealth a single shipment of goods does not suffice to justify suit against it in Pennsylvania. However, Munsingwear's shipment of goods into Pennsylvania have been ongoing and continuous, and the Bork test...