Deveny v. Rheem Manufacturing Company, No. 249

• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
• Writing for the Court: CLARK and WATERMAN, Circuit , and DIMOCK
• Citation: 319 F.2d 124
• Parties: Bonnie Lee Jamieson DEVENY, b.n.f. Frank Jamieson, and Frank Jamieson, Plaintiffs-Appellees, v. RHEEM MANUFACTURING COMPANY, Robertshaw Fulton Controls Company, Defendants-Appellants.
• Docket Number: No. 249,Docket 27681.
• Decision Date: 06 June 1963

319 F.2d 124 (1963)

Bonnie Lee Jamieson DEVENY, b.n.f. Frank Jamieson, and Frank Jamieson, Plaintiffs-Appellees,
v.
RHEEM MANUFACTURING COMPANY, Robertshaw Fulton Controls Company, Defendants-Appellants.

No. 249, Docket 27681.

United States Court of Appeals Second Circuit.

Argued March 4, 1963.

Decided June 6, 1963.

319 F.2d 125

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

319 F.2d 126

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.

319 F.2d 127

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...