Davis H. Elliot Co., Inc. v. Caribbean Utilities Co., Ltd.

Citation513 F.2d 1176
Decision Date31 March 1975
Docket NumberNo. 74-1389,74-1389
PartiesDAVIS H. ELLIOT CO. INC., Plaintiff-Appellant, v. CARIBBEAN UTILITIES CO., LTD., et al., Defendants-Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (6th Circuit)

Wilbur L. Hazlegrove, Hazlegrove, Dickinson, Smith & Rea, Roanoke, Va., Angus W. McDonald, Lexington, Ky., for plaintiff-appellant.

Lindsey W. Ingram, Jr., Stoll, Keenon & Park, Lexington, Ky., for defendants-appellees.

Before WEICK and ENGEL, Circuit Judges, and O'SULLIVAN, Senior Circuit Judge.


This is an appeal from a final order of the United States District Court for the Eastern District of Kentucky, dismissing this diversity action. The order was entered after a hearing but without a written opinion.

We reverse and remand.


The significant facts, all of which are agreed upon by the parties, may be stated briefly. Plaintiff Davis H. Elliot Company, Inc. (Elliot) is organized and incorporated under the laws of Virginia, and conducts an electrical construction and contracting business. Defendant Caribbean Utilities Company Ltd. (Caribbean) is an alien corporation, organized under the laws of the British West Indies, and is engaged exclusively in the manufacture, sale, and distribution of electric power on Grand Cayman Island, which lies to the south of Cuba in the Caribbean Sea. The individual defendants are three Kentucky citizens and residents who are stockholders in Caribbean and officers in the corporation with titles as indicated: (a) Robert Odear, Managing Director and General Counsel; (b) James S. Shropshire, Vice Managing Director; and (c) Evangelos S. Levas, Secretary-Treasurer. Each of the three individual defendants is principally engaged in an occupation unrelated to his position with Caribbean, and, specifically, Odear is an attorney, with offices in Lexington, Kentucky.

In September, 1970, the two corporate parties entered into a contract, under the terms of which Elliot was to build approximately 25 miles of electrical distribution line for Caribbean on Grand Cayman Island. The contract proposal was sent by Elliot to Odear as Managing Director of Caribbean, at Odear's law office address in Lexington; and the proposal was returned to Elliot by mail, approved and signed by Shropshire. Later, in June, 1971, a dispute about the adequacy of Elliot's performance arose, and, in an effort to resolve the disagreement, a meeting was held in Lexington at Odear's law office, with officers of both companies (including all of the individual defendants) in attendance.

At the meeting, an agreement was, in fact, reached (although its exact terms are in dispute), and on June 29, 1971, Odear wrote to one Duval Adams, an officer of Elliot, confirming, on the basis of "our conversation," that the construction contract would be "terminated" as of July 2, 1971. This confirming letter was written on Caribbean Utilities letterhead stationery, which displayed, as Caribbean's address, the address of Odear's Lexington law office.

Elliot's complaint was filed on May 21, 1973, and amended on September 26, 1973. Count I charges Caribbean with failure to honor its obligation to reimburse plaintiff Elliot for $25,764.56 in expenses incurred pursuant to the termination agreement, and also alleges wrongful appropriation of a certain motor vehicle (valued at $1,200) for the use of either Caribbean or Levas. Count II of the complaint alleges that the three named individual defendants (Odear, Shropshire and Levas) are liable to Elliot for wrongfully inducing Caribbean to breach the termination agreement.

Personal service of original process was made on all defendants. (Odear was served both individually and as an officer of Caribbean.) No challenge has been made to the manner of service of process.

In dismissing this action, the District Judge, upon motion: (1) quashed service of summons on Caribbean as to both claims in Count I on the ground that Caribbean does not transact sufficient business in the Commonwealth of Kentucky to make it amenable to service there; (2) dismissed Count II (wrongful inducement to breach by the individual defendants) for failure to state a claim upon which relief can be granted; and (3) dismissed the portion of Count I which charged Levas with wrongful appropriation of the motor vehicle, apparently for insufficiency of amount in controversy.

The two principal issues presented for our consideration are: first, whether the District Court has in personam jurisdiction over defendant Caribbean Utilities Company, Ltd.; and second, whether Count II of plaintiff's complaint (which charges officers of Caribbean with wrongfully inducing that corporation to breach its agreement with Elliot) states a claim. The question of the dismissal of the $1,200 claim against defendant Levas is a subsidiary matter which depends upon the result reached with respect to the second principal issue.


This action came before the District Court under the provisions of28 U.S.C. § 1332, and it is now well settled that, subject to the requirements of the due process clause of the Fourteenth Amendment, federal courts in diversity cases must look to the law of the appropriate state to determine the extent of their personal jurisdiction. See e. g., In-Flight Devices Corp. v. Van Dusen Air, Inc., 466 F.2d 220, 224 (6th Cir. 1972); Velandra v. Regie Nationale des Usines Renault, 336 F.2d 292, 294 (6th Cir. 1964); Smartt v. Coca-Cola Bottling Corp., 318 F.2d 447, 448 (6th Cir. 1963). The applicable state law here is the Kentucky long-arm statute, which reads, in pertinent part, as follows:

"(1) As used in this section, 'person' includes . . . a corporation . . . (which) is a nonresident of this commonwealth.

(2) (a) A court may exercise personal jurisdiction over a person who acts directly or by an agent, as to a claim arising from the person's:

1. Transacting any business in this commonwealth; . . ." (emphasis added). KRS 454.210(1) and (2)(a) 1.

The basic inquiry as to the validity of asserted in personam jurisdiction is a two-fold one which requires (1) a determination of whether the state legislature has authorized the courts of the state to exercise jurisdiction over the nonresident in question, and (2) a determination of whether the jurisdiction so authorized is consistent with Fourteenth Amendment due process as that concept is delineated in the "minimum contacts" formula of International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945); 1 McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957); and Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). However, these two lines of inquiry merge if the "legislature has authorized (the state) courts to reach to the full constitutional limits in pursuit of a non-resident defendant," Southern Machine Company v. Mohasco Industries, Inc., 401 F.2d 374, 376 (6th Cir. 1968).

KRS 454.210 is of recent vintage, and the term "transacting any business" has not been authoritatively construed by the Kentucky courts; but Caribbean argues vigorously that such a merged inquiry is inappropriate here (1) because the "transacting any business" standard is simply a "codification" of judicial interpretations of the analogous portion of Kentucky's former long-arm statute, KRS 271.610(2), 2 and (2) because the term "doing of business" in the former statute was not coextensive with the boundaries of the due process clause. We disagree for the reason that, while results varied with the facts under consideration, both the state and federal judiciary often looked to International Shoe Co. v. Washington, supra, 326 U.S. 310, 66 S.Ct. 154 (1945) and its progeny as the touchstones for determining the scope of the personal jurisdiction of the Kentucky courts in "doing of business" cases. See e. g., Field Enterprises Educational Corp. v. Hopkins,378 S.W.2d 797 (Ky.1964); Charles Zubik & Sons v. Marine Sales & Service,300 S.W.2d 35 (Ky.1957); McKenna v. Udall, 135 U.S.App.D.C. 335, 418 F.2d 1171 (1969); Irby v. All State Industries of North Carolina, 305 F.Supp. 772 (W.D.Ky.1969).

Moreover, even if Caribbean is correct in its contention that the former long-arm statute was limited to some degree in its due process implications, we believe, as this Court indicated previously by way of obiter dictum, that any such limitation was removed by the enactment of the statute which we consider here. Etheridge v. Grove Manufacturing Co., 415 F.2d 1338, 1340-41 (6th Cir. 1969).

This conclusion is in accord with interpretations of the same statutory language earlier enacted in other jurisdictions. For example, in construing Ohio's "transacting any business" long-arm provision, this Court, per Judge Celebrezze, stated in In-Flight Devices Corporation v. Van Dusen Air, Inc., 466 F.2d 220, 225 (6th Cir. 1972):

"Most significant of (the reasons for holding that the Ohio 'transacting any business' statute extends personal jurisdiction to the full constitutional limits) is the identity between this subsection and a provision of the Illinois Civil Practice Act (Ill.Stat.Ann. c. 110, § 17(1)(a)) which has been held to extend jurisdiction to the limits of due process. The opinion in which this interpretation of the Illinois provision was set forth, Nelson v. Miller (11 Ill.2d 378, 143 N.E.2d 673 (1957)) was widely heralded as a decision of major import. Decided a number of years before the Ohio long-arm statute was enacted, the significance of the construction could not have escaped the Ohio legislators during their deliberations. It is the settled rule in Ohio that when comparable legislation has been construed in other jurisdictions prior to the enactment of the Ohio statute, the interpretation put on the law elsewhere is to be given great weight in construing the Ohio Statute. Schneider v. Laffoon, 4 Ohio St.2d 89, 212 N.E.2d 801 (1965). Applying this...

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