Engine Specialties, Inc. v. Bombardier Limited

• Decision Date: 20 January 1972
• Docket Number: No. 71-1293.,71-1293.
• Citation: 454 F.2d 527
• Parties: ENGINE SPECIALTIES, INC., Plaintiff-Appellee, v. BOMBARDIER LIMITED, Defendant-Appellant.
• Court: U.S. Court of Appeals — First Circuit

454 F.2d 527 (1972)

ENGINE SPECIALTIES, INC., Plaintiff-Appellee, v. BOMBARDIER LIMITED, Defendant-Appellant.

No. 71-1293.

United States Court of Appeals, First Circuit.

Heard November 3, 1971.

Decided January 20, 1972.

John Vanderstar, Washington, D. C., with whom George H. Lewald, William L. Patton, Ropes & Gray, Boston, Mass., and Covington & Burling, Washington, D. C., were on brief, for defendant-appellant.

Thayer Fremont-Smith, Boston, Mass., with whom Robert S. Frank, Jr., and Choate, Hall & Stewart, Boston, Mass., were on brief for plaintiff-appellee.

Before ALDRICH, Chief Judge, BREITENSTEIN,^* Senior Circuit Judge, and COFFIN, Circuit Judge.

BREITENSTEIN, Senior Circuit Judge.

This appeal relates to the grant of a preliminary injunction, and not to the merits of the controversy. Plaintiff-appellee, Engine Specialties, Inc. (ESI), sought and obtained a preliminary injunction restraining defendant-appellant, Bombardier, Ltd. (Bombardier), from marketing in North America certain mini-bikes or mini-cycles¹ manufactured by an Italian corporation, Agrati-Garelli, S.p.A. (Agrati).

ESI, a Pennsylvania corporation with its principal office in that state, distributes recreational vehicles including mini-cycles. ESI had contracted with Agrati for Agrati to manufacture and sell mini-cycles to ESI for distribution under ESI's trade name "Bronco." ESI's action was based on claims that Bombardier, a Canadian corporation which manufactures snowmobiles, had tortiously induced Agrati to breach its contract with ESI, had maliciously interfered with a profitable business relationship between ESI and Agrati, and had violated the federal anti-trust laws. Agrati is not a party to the action. The district court, D.C., 330 F.Supp. 762, after finding that ESI was likely to prevail on the merits and was suffering irreparable harm, entered a preliminary injunction against Bombardier.

The initial 1967 ESI-Agrati contract was supplemented in 1968 and 1970. The 1968 agreement covered further sales of mini-cycles to ESI by Agrati, shipping schedules, and procedures concerning letters of credit. It also provided that after one year either party could cancel the agreement upon six months notice, and that, if Agrati cancelled, it would be precluded from selling in North America certain mini-cycles for one or two years depending on the model involved. The 1970 agreement, among other things, amended the 1968 agreement so that any default by ESI continuing for 20 days would terminate the 1968 agreement, and more importantly would void the covenant not to compete.

In August, 1970, representatives of Bombardier and Agrati met in Canada to discuss possible arrangements between them for the manufacture and sale of mini-cycles in the United States and Canada. Nothing concrete came of that meeting, but as the discussions progressed Bombardier became aware of the ESI-Agrati contract. Bombardier unsuccessfully attempted to persuade ESI to relinquish its distributorship contract. On September 16, Agrati decided to invoke the six-month termination clause and, thereafter, Bombardier and Agrati discussed possible methods of "getting around" the covenant not to compete.

The course of business dealings between Agrati and ESI had not complied strictly with their contractual agreements. At various times issues arose over shipping schedules and letters of credit which might have indicated a default by one of the parties. Neither party was inflexible, and matters were amicably settled. On October 16, 1970, Agrati wrote ESI, complained about letters of credit and shipping schedules, and said that because of irregularities ESI was considered to be in default of the 1968 agreement. However, on October 19 Agrati telephoned ESI and agreed to new shipping schedules. By an October 26 letter to Agrati, ESI contested the default claim and asserted that the difficulties had been caused by Agrati, that the October 19 telephone conversation had taken care of the matter, and that ESI had complied with the shipping agreements. On November 6, Agrati cabled ESI and demanded that letters of credit be opened for forthcoming shipments.

On November 7, Bombardier and Agrati representatives met in Philadelphia. On November 15, ESI cabled Agrati in response to the November 6 cable and requested a shipment delay of 10-15 days. By a November 25 letter Agrati wrote ESI that the 1968 and 1970 agreements had been immediately terminated because of ESI's failure to open letters of credit and meet shipping schedules. Since then, Agrati has refused to supply ESI with mini-cycles or parts. On December 8, ESI opened a letter of credit for the November shipment and so informed Agrati. In reply Agrati confirmed the November 25 letter and said that further inquiries should be made through their lawyers. Since December, Agrati has supplied Bombardier with Bronco-type mini-cycles for distribution in the United States and Canada.

Bombardier was served by mail at its corporate headquarters in Canada. The first question is whether extraterritorial service suffices to subject Bombardier to in personam jurisdiction. Reliance is had on the Massachusetts long arm statute and on the federal anti-trust statutes. The record is unclear as to which basis was held by the trial court to sustain its jurisdiction.

The applicable provisions of the Massachusetts long arm statute are, Mass. G.L. c. 223A, § 3:

"A court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a cause of action in law or equity arising from the person\'s * * *

(d) causing tortious injury in this commonwealth by an act or omission outside this commonwealth if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in this commonwealth; * * *."

ESI has no offices or place of business in Massachusetts. Bombardier does not have a place of business in Massachusetts, but does have one of its two wholly owned American subsidiaries there. Agrati has no place of business in Massachusetts.

The applicability of the statute depends on whether there has been a "tortious injury in the commonwealth" as the result of Bombardier's actions. See, e. g., Mark v. Obear & Sons, Inc., D. Mass., 1970, 313 F.Supp. 373. Bombardier says that any measure of injury would be the loss of ESI profits and that such loss would occur at ESI's principal place of business, in Pennsylvania. ESI responds that in 1970 more than $130,000 worth of mini-cycles were...