Deveny v. Rheem Manufacturing Company

Citation319 F.2d 124
Decision Date06 June 1963
Docket NumberNo. 249,Docket 27681.,249
PartiesBonnie Lee Jamieson DEVENY, b.n.f. Frank Jamieson, and Frank Jamieson, Plaintiffs-Appellees, v. RHEEM MANUFACTURING COMPANY, Robertshaw Fulton Controls Company, Defendants-Appellants.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

John M. Dinse, of Edmunds, Austin & Wick, Burlington, Vt., for defendant-appellant Rheem Mfg. Co.

A. Pearley Feen, Burlington, Vt. (Paul D. Sheehey, Burlington, Vt., on the brief), for defendant-appellant Robertshaw Fulton Controls Co.

Philip H. Hoff, of Black, Wilson & Hoff, Burlington, Vt., for Bonnie Lee Jamieson Deveny and Frank Jamieson, plaintiffs-appellees.

Before CLARK and WATERMAN, Circuit Judges, and DIMOCK, District Judge.

CLARK, Circuit Judge.

On August 17, 1958, plaintiff Bonnie Lee Jamieson Deveny went to the cellar of her aunt's home in Burlington, Vermont, to relight the pilot light of the hot water heater, which had gone out. The heater, manufactured by defendant-appellant Rheem Manufacturing Company and containing a control device manufactured by defendant-appellant Robertshaw Fulton Controls Company, exploded, and plaintiff sustained serious burns.

This action was instituted by plaintiff Bonnie Lee and her father as next friend and on his own behalf in the United States District Court for the District of Vermont by service against the defendants, both foreign corporations, in accordance with Vermont's so-called "long-arm" or "single act" statute, 12 V.S.A. § 855. Service pursuant to a state statute is a permissible way of commencing an action in a federal district court. See Fed.R.Civ.P. 4(d) (7). The Vermont statute, passed in 1947, has the title "Doing business as appointment of process agent," and provides:

"If a foreign corporation makes a contract with a resident of Vermont to be performed in whole or in part by either party in Vermont, or if such foreign corporation commits a tort in whole or in part in Vermont against a resident of Vermont, such acts shall be deemed to be doing business in Vermont by such foreign corporation and shall be deemed equivalent to the appointment by such foreign corporation of the secretary of state of Vermont and his successors to be its true and lawful attorney upon whom may be served all lawful process in any actions or proceedings against such foreign corporation arising from or growing out of such contract or tort. The making of such contract or the committing of such tort shall be deemed to be the agreement of such foreign corporation that any process against it which is so served upon the secretary of state shall be of the same legal force and effect as if served on the foreign corporation at its principal place of business in the state or country where it is incorporated and according to the law of that state or country." 12 V.S.A. § 855.

12 V.S.A. § 856 requires both the secretary of state and the plaintiff to give actual notice to the tort-feasor by sending copies of the process to its principal place of business by registered mail.

We are confronted at the outset with an attack upon the jurisdiction of the court below. Jurisdiction cannot be sustained unless the Vermont statute under which service was had comports with constitutional requirements of due process. This statute and others like it1 represent the latest steps in the well-established trend away from the territorial concept of personal jurisdiction, which underlay much of nineteenth century Anglo-American jurisprudence. See, e. g., the celebrated opinion of Lord Ellenbrough in Buchanan v. Rucker, 9 East 192 (K.B.1808); and cf. the equally famous opinion of Mr. Justice Field in Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565. In the late nineteenth century, and continuing on into our own, increased use of the corporate form, together with the greater mobility afforded by modern means of transportation, brought about an expansion of corporate activity to a nationwide scale; corporations simply refused to remain penned up within their own states of incorporation. The existence of corporations which could — and did — do business on a nationwide scale necessitated revision of older, more limited, notions concerning jurisdiction. The need gave birth to a trend toward expansion of the constitutionally permissible scope of state jurisdiction over foreign corporations. This trend was reflected by such cases as International Shoe Co. v. State of Washington, 326 U. S. 310, 66 S.Ct. 154, 90 L.Ed. 95, 161 A.L.R. 1057.

The Supreme Court has most recently addressed itself to the problem in McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223, and Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283. In McGee, a California resident had purchased a life insurance contract from an Arizona corporation whose insurance obligations were later assumed by International. Neither insurance company ever had an office or agent in California; indeed, the only insurance business done by International in California concerned the policy in the McGee case. But under California's Unauthorized Insurers Process Act, Cal.Ins. Code §§ 1610-1612, such single acts by a nonadmitted foreign or alien insurer as the issuance or delivery to residents of contracts insuring the lives or persons of residents or resident property, or the collection of premiums for such contracts, or solicitation of insurance contracts, constitute the appointment of the insurance commissioner as agent for service of process in suits arising out of such transactions, even if the transactions are conducted entirely by mail. A unanimous United States Supreme Court found it "apparent" that service of process upon the Insurance Commissioner of California, who, as directed by the statute, forwarded a copy by registered mail to International's principal place of business in Texas, was sufficient to give California personal jurisdiction over the insurance company.

It is now clear that McGee did not mark a complete abandonment of the nineteenth century concept that in personam jurisdiction must be limited by notions of territoriality in view of the limitations stated in Hanson v. Denckla, supra, 357 U.S. 235, 251, 78 S.Ct. 1228, 2 L.Ed.2d 1283. There the transaction at issue occurred entirely outside the state asserting jurisdiction. A Pennsylvania domiciliary executed a deed of trust in 1935 to a Delaware trust company as trustee and delivered the corpus — corporate securities — to the trustee. In 1944, the settlor became a Florida resident and remained so until her death in 1952. The Florida courts claimed jurisdiction over the Delaware trustee under a Florida statute permitting service of process by publication upon parties to a proceeding involving the construction of a will. The issue was whether the settlement of the trust was truly inter vivos or in fact testamentary. The Court, sharply divided in a five-to-four decision, found that the nonresident corporate trustee lacked sufficient contacts with Florida to warrant its subjection to the jurisdiction of that state's courts. The majority affirmed the necessity of certain essential contracts with the territory in which the action is brought, which were present in McGee, but missing in the case then before it:

"The cause of action in this case is not one that arises out of an act done or transaction consummated in the forum State. In that respect, it differs from McGee v. International Life Ins. Co., 355 U.S. 220 78 S.Ct. 199, 2 L.Ed.2d 223, and the cases there cited."

Thus the long arm of state courts is permitted to reach out-of-state defendants only in suits growing out of acts which have created contacts with the forum state, however limited or transient such contacts may be.

The Vermont statute represents a practical — and we think successful — attempt to assert jurisdiction in cases where the interests of Vermont residents are affected while staying on the constitutional side of the line that divides McGee and Hanson. This conclusion seems especially warranted under the construction of the statute by the Vermont supreme court in Smyth v. Twin State Improvement Corp., 116 Vt. 569, 80 A.2d 664, 668, 25 A.L.R.2d 1193, which is, of course, binding on us. In that case a Massachusetts roofer negligently placed holes in the roof and sides of a Vermonter's house while it was endeavoring to reroof the house. The Vermont court rejected an attack on the constitutionality of the act by stressing the statute's rationale: "No sound reason appears to exist why foreign corporations may not be held responsible in Vermont for wrongful acts done in Vermont. If a foreign corporation voluntarily elects to act here, it should be answerable here and under our laws. The consequences imputed to it lie within its own control, since it need not act within this state at all, unless it so desires." The act by a foreign corporation which will subject it to Vermont's jurisdiction under 12 V.S. A. § 855 must be one which the foreign corporation could know to have potential consequences in Vermont. Otherwise the statute could not be rationalized on the ground that the foreign corporation's subjection to Vermont laws is, in effect, its own doing. This interpretation of the statute would seem to insure its use only in cases where the minimum contacts required by Hanson and McGee are present.

As can be seen from the language of 12 V.S.A. § 855, the statute comprehends two types of activity: contracting and tortious conduct. It is impossible to imagine a case arising from a contract made by a foreign corporation "with a resident of Vermont to be performed in whole or in part by either party in Vermont" where contacts with Vermont would not suffice to sustain jurisdiction. The statute merely characterizes the extent of contacts with the forum state actually present in McGee. While Hanson affirms the necessity of a defendant's having such "minimal contacts" with the forum...

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