Etheridge v. Grove Manufacturing Company, Civ. A. No. 1663.

• Decision Date: 18 July 1968
• Docket Number: Civ. A. No. 1663.
• Citation: 287 F. Supp. 437
• Parties: Roy F. ETHERIDGE, Plaintiff, v. GROVE MANUFACTURING COMPANY and Nixon Machinery and Supply Company, Defendants.
• Court: U.S. District Court — Western District of Kentucky

287 F. Supp. 437

Roy F. ETHERIDGE, Plaintiff, v. GROVE MANUFACTURING COMPANY and Nixon Machinery and Supply Company, Defendants.

Civ. A. No. 1663.

United States District Court W. D. Kentucky, at Paducah.

July 18, 1968.

Chas. A. Williams & Associates, Paducah, Ky., for plaintiff.

Earle T. Shoup, Paducah, Ky., for defendant Grove Manufacturing Company.

George R. Effinger, Paducah, Ky., for defendant Nixon Mach. & Supply Co.

MEMORANDUM

SHELBOURNE, Senior District Judge (by designation).

July 8, 1968, this case came on for hearing, by agreement of counsel for parties, for an oral argument on the motions of the defendants Grove Manufacturing Company and Nixon Machinery and Supply Company, at Paducah, Kentucky.

The separate motions of the defendants seek a dismissal of this action for lack of jurisdiction and to quash the service of process. The defendant Grove Manufacturing Company is a corporation organized under the laws of the State of Pennsylvania and has its principal office and place of business at Shady Grove, Pennsylvania. It has no place of business in the State of Kentucky and has not appointed an agent upon whom process could be served within the State of Kentucky as required of nonresident corporations by Section 271.385(2) Kentucky Revised Statutes.

The defendant Nixon Machinery and Supply Company is a corporation created under the laws of the State of Tennessee and has its principal office and place of business at Nashville, Tennessee, and did not at any time and does not now maintain an office or principal place of business within the State of Kentucky, and has not appointed an agent upon whom process could be served in the State of Kentucky as required of non-resident corporations by Section 271.385(2) Kentucky Revised Statutes.

The machine or equipment involved in this action is a crane equipped with a boom and was manufactured by the defendant Grove and sold by it to defendant Nixon Machinery and Supply Company on April 15, 1966, and shipped to Nixon at Chattanooga, Tennessee, by truck of a public carrier. The sale to Nixon was financed by Credit Alliance Corporation, New York, New York. The crane was leased to Blount Brothers Construction Company of Montgomery, Alabama, by an agreement dated May 30, 1966, between Nixon and Blount Brothers Construction Company, and was delivered by public carrier to Blount, Ft. Campbell Army Base, Clarksville, Tennessee, on or about June 2, 1966. The machine was in the possession of Blount Brothers Construction Company at Ft. Campbell, Kentucky, on September 20, 1966, the date the accident is alleged to have occurred, although previously on August 31, 1966, Nixon had sold the crane to R. L. Eatherly. That sale was made, however, with the understanding that Blount Brothers Construction Company would retain the machine until they finished work which they had under contract at Ft. Campbell on the date the machine was sold to Eatherly by Nixon Machinery and Supply Company.

Plaintiff contends that personal jurisdiction of the defendants exists by reason of the service of process upon each of the defendants pursuant to Kentucky's "long arm" statute, Section 271.610(2) Kentucky Revised Statutes, which is as follows:

"(2) Any foreign corporation that does business in this state without having complied with the provisions of KRS 271.385 as to designation of process agent shall, by such doing of business, be deemed to have made the Secretary of State its agent for the service of process in any civil action instituted in the courts of this state against such corporation involving a cause of action arising out of or connected with the doing of business by such corporation in this state. The plaintiff in such an action shall set forth in his petition the post office address of the home office of the corporation."

Each of the defendants, while denying that it has carried on business in the State of Kentucky to the extent that it can now be deemed to have made the Secretary of State its agent for service of process in this action, strongly insists that the alleged cause of action set up in the complaint does not involve a "cause of action arising out of or connected with the doing of business by such corporation in this state". The manufacturer of the product involved, Grove, denies having any connection whatever with Blount Brothers Construction Company and contends that its sale to Nixon was completely consummated so far as it participated when the crane was delivered by public carrier to Nixon at Chattanooga, Tennessee, and insists that it had no interest or claim of any kind in the crane or machine after April 15, 1966, the date of its assignment of the conditional sales contract to Credit Alliance Corporation.

Defendant Nixon's contention is that it leased the crane to Blount Brothers at Clarksville, Tennessee, and that it did not have any connection whatever with Blount's moving the equipment into Kentucky and using it in the State of Kentucky.

On August 31, 1966, Nixon sold the crane to R. L. Eatherly and had no title to the crane after that date.

Kentucky's "long arm" statute, K.R.S. 271.610, supra, hinges jurisdiction on (1) that the corporation does business in the state without having complied with the provisions of K.R.S. 271.385 by designating a process agent, and (2) that the action in which the process is served upon the Secretary of State as process agent of the foreign corporation shall be a cause of action arising out of or connected with the doing of business by the corporation in Kentucky. Counsel for the plaintiff and for the defendant corporations all rely upon the case of International Shoe Company v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, decided in 1945. The Supreme Court said that the criteria by which it marked the boundary line between activities which justified subjecting a corporation to suit and those which do not cannot be simply mechanical or quantitative, and that the test is not whether the activity which the corporation has seen fit to procure through its agents in another state is a little more or a little less. In the International Shoe case the activities that were carried on by the Company's agents and employees were neither irregular nor casual. The Supreme Court described them as systematic and continuous throughout the years involved and resulted in a large volume of interstate business. Of vital importance in that case, and subsequent cases, the obligation which was sued upon arose out of those very activities and established sufficient contacts or ties with the State of Washington to make it reasonable and just according to traditional concepts of fair play and justice to permit the state to enforce the obligations which the Company incurred there.

The International Shoe case modified the long standing holding of the Supreme Court in Pennoyer v. Neff, 95 U. S. 714, 24 L.Ed. 565, and the Court said "presence" in the state had never been doubted when the activities of a corporation have not only been continuous and systematic, but have given rise to the liability sued on, even though no consent to be sued or authorization to an agent to accept service of process had been given; the Court said:

"It has been generally recognized that the casual presence of the corporate agent or even his conduct of single or isolated items of activities in a state in the corporation's behalf are not enough to subject it to suit on causes of action unconnected with the activities there."

In July 1951 the case of Star Elkhorn Coal Co. v. Red Ash Pocahontas Coal Co., 102 F.Supp. 258, D.C. E.D.Ky., was decided. In that opinion the Court said:

"The term `doing business' has been so frequently discussed by courts and variously applied in different cases that authority can be found for any position a court takes in a given state of fact."

The facts in that case were that a coal agency in Kentucky had some one to four employees for the purpose of purchasing, inspecting, accepting and rejecting coal at various tipples and mine operations. It is apparent that the obligation sued on in the Star Elkhorn Coal case had not only been continuous and systematic, but had given rise to the liabilities sued on and the long arm statute was held sufficient to give the court jurisdiction of the defendant. The motion to quash the return on the summons was overruled.

Another case, also from the Eastern District of Kentucky is styled Brandeis Mach. & Sup. Co. v. Matewan Alma Fuel Corp., 147 F.Supp. 821, decided in 1957. The defendant coal company's activities were limited to the production of coal in West Virginia, although its stockholders lived in Kentucky, it maintained a bank account in Kentucky, and its stockholders met informally in Kentucky to discuss matters of business of the corporation. The written contract, which was the basis of the action sued upon, and which was dated February 8, 1956, referred to the Matewan Alma Fuel Corporation of Pikeville, Kentucky, as the party of the second part, although it was shown by the testimony of its secretary-treasurer that the contract was signed by him in West Virginia where the principal office of the business was located. Judge Swinford said:

"A person or corporate entity has a right to defend itself at home. Justice, to those dealing with the corporation, has demanded that this rule be modified where the corporation has gone into a foreign jurisdiction in furtherance of its business and engaged in activities with residents and citizens of the foreign jurisdiction, but to require the defendant to defend this action away from its home where its office is located and where it carries on its activities is to deny to it a fundamental right and to lay upon it a great and unreasonable burden."

In 1957 the Supreme Court decided the case of McGee v. International Life Insurance Company, 355 U.S. 220, 78 S. Ct. 199,...