Electro-Craft Corp. v. Maxwell Electronics Corp.

• Decision Date: 15 October 1969
• Docket Number: No. 19380.,19380.
• Citation: 417 F.2d 365
• Parties: ELECTRO-CRAFT CORPORATION, Appellee, v. MAXWELL ELECTRONICS CORPORATION, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

417 F.2d 365 (1969)

ELECTRO-CRAFT CORPORATION, Appellee, v. MAXWELL ELECTRONICS CORPORATION, Appellant.

No. 19380.

United States Court of Appeals Eighth Circuit.

October 15, 1969.

Jerome B. Pederson, of Fredrikson, Byron & Colborn, Minneapolis, Minn., for appellant.

Harold D. Field, Jr., of Leonard, Street & Deinard, Minneapolis, Minn., for appellee.

Before BLACKMUN, LAY and HEANEY, Circuit Judges.

HEANEY, Circuit Judge.

This appeal raises the familiar problem of in personam jurisdiction, by substituted service, over a foreign corporation. The District Court denied the defendant's motion to quash service of process and to dismiss. We affirm.

The plaintiff, Electro-Craft Corporation, is a Minnesota corporation engaged in the manufacture of small motors and military radio communications' equipment. The defendant, Maxwell Electronics Corporation, is a Texas corporation engaged in the manufacture of receiver-transmitters. On June 25, 1964, the plaintiff wrote to the defendant and stated that it would be interested in representing the defendant in the sale and distribution of military electronic equipment. The defendant responded that it would be interested in obtaining an order for receiver-transmitters. Negotiations by mail and telephone continued for approximately one year. During the year, a representative of the plaintiff traveled to Texas to view the defendant's manufacturing facilities. As a result of the negotiations, the plaintiff mailed from Minnesota to Texas an order for 320 receiver-transmitters, and the defendant mailed an acceptance from Texas to Minnesota.

Under the terms of the contract, the receiver-transmitters were to be shipped F.O.B. Garland, Texas, to plaintiff's plant in Minnesota. Payment was to be made pursuant to a letter of credit of the First National Bank of Dallas, the plaintiff having first made arrangements with the First National Bank of Minneapolis to authorize the Dallas bank to honor drafts, totaling $152,000 if accompanied by various commercial documents¹ including (1) a written acceptance signed by the plaintiff acknowledging that the units had been received and inspected or that the units had been received and inspection waived, and (2) a warranty in the following form: "Maxwell Electro Corporation does warrant all equipment against defective workmanship, components and parts (with the exception of tubes and lamps) for a period of 120 days from the date of shipment. This warranty is limited to the manufacturer's warranty for the individual components and parts."

Between November 1, 1965, and November 22, 1965, the defendant made five shipments of receiver-transmitters totaling 278 units to the plaintiff in Minnesota. A representative of the plaintiff inspected eighty-five units and spot tested thirty-five more at the defendant's Texas plant. Inspection was waived on an additional 158 units, eight of which were not accepted by the plaintiff. Drafts on all units shipped were paid when the required documents were presented to the Dallas bank by the defendant.

The defendant never had an officer, employee or agent in Minnesota, never maintained an office or any physical facility in Minnesota, never advertised directly in Minnesota, and never qualified to do business in Minnesota. The defendant was not obligated to send a representative to Minnesota to install the receiver-transmitters or to service the units under the warranty. The transaction involved here is the only one between the parties.

The Plaintiff commenced this action in a Minnesota state court on grounds of fraud, misrepresentation, breach of contract and breach of warranty. It alleged that the receiver-transmitters did not conform to the specifications as represented by the defendant. Substituted service was purportedly effected upon the defendant pursuant to the Minnesota One Act Statute, Minn. Stat. § 303.13, Subd. 1(3) (1965).² The cause was removed to the United States District Court, District of Minnesota; the defendant's motion to quash service of process and to dismiss was denied; and this appeal was taken by permissive interlocutory appeal.

Two questions are raised on appeal: (1) whether the Minnesota Supreme Court would find in personam jurisdiction over the defendant by substituted service pursuant to Minnesota's One Act Statute, Minn.Stat. § 303.13, Subd. 1(3) (1965), and, if so, (2) whether the exercise of jurisdiction would violate the defendant's right to due process of law under the Fourteenth Amendment.

Under the Minnesota Statute, jurisdiction is obtained over a foreign corporation through substituted service if (1) the corporation and a Minnesota resident are parties to a contract to be performed at least partially by either party in Minnesota; or (2) the corporation commits a tort in whole or in part in Minnesota against a Minnesota resident.

In Aftanase v. Economy Baler Company, 343 F.2d 187 (8th Cir. 1965), we reviewed the Minnesota cases³ interpreting the One Act Statute. A reappraisal of those cases and a study of the cases decided since our 1965 decision⁴ convinces us that the Minnesota Supreme Court would conclude that the facts here warrant the application of the statute to the defendant.

If the plaintiff's action is viewed as sounding in contract, the language of the statute is satisfied because the contract was obviously partially performed by the plaintiff in Minnesota.⁵ Furthermore, the nature of the transaction was such as to satisfy the minimum contact requirements⁶ of the Minnesota Supreme Court for the exercise of jurisdiction. The plaintiff was a resident buyer; it conducted negotiations for the purchase of equipment of significant value by mail and phone from Minnesota; it placed an order for the equipment in the mail in Minnesota; and, it made arrangements to pay for the equipment through a Minnesota bank. The seller, a non-resident, completed the transaction with full knowledge of the buyer's residence and shipped the equipment directly to it.

If the plaintiff's action is viewed as sounding in tort, substituted service can be supported on the ground that the tort was partially committed in Minnesota — the injury to the plaintiff occurred in that state.⁷

The defendant cites Marshall Egg Transport Co. v. Bender Goodman Co., 275 Minn. 534, 148 N.W.2d 161 (1967), as authority for its position that the Minnesota court would not find jurisdiction here. We do not agree. There, a Minnesota seller brought an action against a nonresident buyer to recover for the price. Relying on Fourth Northwestern Nat. Bank v. Hilson Industries, 264 Minn. 110, 117 N.W.2d 732 (1962), the court granted the non-resident buyer's motion to quash service of process. Quoting from Fourth Northwestern, the court stated:

"* * * There is a sharp distinction between suing a nonresident seller and invoking § 303.13 against a nonresident buyer."

148 N.W.2d at 164.

One reason for this distinction, articulated by the Minnesota Supreme Court, was that a nonresident seller subjects itself to the obligation of amenability to suit in return for the right to compete for sales in the Minnesota market. Such reciprocity does not apply to the non-resident buyer. We recognized this distinction in Aftanase with regard to Fourth Northwestern and we feel that the distinction is controlling here. The defendant contracted for a means of payment that might obviate the necessity of its suing in a Minnesota court to recover the price, but its right to do so, if necessary, remained.

We turn to the due process question. The answer to it depends upon whether the defendant's contacts with Minnesota were such that "the maintenance of the suit in Minnesota does not offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945).⁸ In Aftanase, supra, we outlined five factors to be considered in determining whether the fair play and substantial justice requirements were satisfied: (1) the nature and quality of the contacts with the forum state; (2) the quantity of contacts with the forum state; (3) the relation of the cause of action to the contacts; (4) the interest of the forum state in providing a forum for its residents; and (5) the convenience to the parties. A consideration of these factors convinces us that the exercise of jurisdiction was consistent with constitutional requirements.

(1 & 2) The quality and the quantity of the contacts were such as to satisfy the requirements.

(a) The defendant purposely availed itself of the privilege of doing business with a Minnesota resident. Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). It entered into a transaction having an impact on the commerce of that state. By so doing, it invoked the benefit and protection of Minnesota\'s laws and could reasonably have anticipated that its act would have consequences in Minnesota. The fact that no agents of the defendant entered the state is not controlling. Southern Machine Company v. Mohasco Industries, Inc., 401 F.2d 374 (6th Cir. 1968).

(b) While the plaintiff initiated negotiations with the defendant, the defendant actively and voluntarily participated in them thereafter. Southern Machine Company v. Mohasco Industries, Inc., supra; Shealy v. Challenger Manufacturing Company, 304 F.2d 102, 104 (4th Cir. 1962).⁹

(c) While the contract was consummated in Texas,¹⁰ contractual consequences were reasonably anticipated in Minnesota.

(d) While the equipment was shipped F.O.B. Texas, the defendant made arrangements for the shipment and knew that the equipment was being shipped directly to a Minnesota resident without passing through an intervening dealer.

(e) While the defendant structured the transaction so as to be able to secure payment at a Texas bank without maintaining an action in Minnesota for the price, he could have used the Minnesota courts to obtain payment, particularly if the plaintiff had received

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