Etzler v. Dille and McGuire Manufacturing Company

• Decision Date: 23 December 1965
• Docket Number: Civ. A. No. 64-C-76-R.
• Citation: Etzler v. Dille and McGuire Manufacturing Company, 249 F.Supp. 1 (W.D. Va. 1965)
• Court: U.S. District Court — Western District of Virginia
• Parties: Marshall E. ETZLER, Plaintiff, v. DILLE AND McGUIRE MANUFACTURING COMPANY, Defendant.

249 F. Supp. 1

Marshall E. ETZLER, Plaintiff, v. DILLE AND McGUIRE MANUFACTURING COMPANY, Defendant.

Civ. A. No. 64-C-76-R.

United States District Court W. D. Virginia, Roanoke Division.

November 19, 1965.

Addenda December 23, 1965.

James M. Roe, Jr., Carter & Roe, Fincastle, Va., for plaintiff Etzler.

Fred B. Gentry, Gentry, Locke, Rakes & Moore, Roanoke, Va., for defendant Dille & McGuire Mfg. Co.

DALTON, Chief Judge.

This is an action in warranty in which plaintiff, a citizen of Virginia, seeks recovery against defendant, a "citizen" of Indiana, for injuries sustained while plaintiff was operating a "Turfmaster" riding rotary lawn mower which had been manufactured by the defendant.

The complaint alleges that while plaintiff was cutting his lawn on August 23, 1962, the date of purchase of the machine, it, "without warning or reason, tilted from the ground and fell back over onto the plaintiff mutilating his left foot so severely that it became necessary to amputate the left leg below the knee."

Plaintiff seeks judgment in the sum of $500,000 plus interests and costs.

On August 28, 1964, defendant filed three motions to dismiss the complaint, one of which has since become moot.

The remaining two motions assert (1) that the complaint fails to state a claim upon which relief can be granted, and (2) that Dille and McGuire Manufacturing Company is not amenable to service of process in the Western District of Virginia.

In support of the latter motion, defendant points out that it is a foreign corporation which has not qualified to do business in Virginia and which keeps neither an office nor personnel within the State.

By an order entered April 29, 1965, this court overruled the first motion and delayed a ruling on the second, thinking it desirable for the parties to present further evidence and argument on the jurisdictional point. Such has since been presented, and this opinion will address itself to the question of jurisdiction over the defendant.

The statute involved is Virginia's new "long-arm" statute, Va. Code Ann. § 8-81.2 (Supp.1964), enacted by the General Assembly on March 31, 1964. This section of Chapter 4.1 reads as follows:

When personal jurisdiction over person may be exercised

(a) A court may exercise personal jurisdiction over a person, who acts directly, or by an agent, as to a cause of action arising from the person's

(1) Transacting any business in this State;

(2) Contracting to supply services or things in this State;

(3) Causing tortious injury by an act or omission in this State (4) Causing tortious injury in this State by an act or omission outside this State 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 State;

(5) Causing injury in this State to any person by breach of warranty expressly or impliedly made in the sale of goods outside this State when he might reasonably have expected such person to use, consume, or be affected by the goods in this State, provided that he also 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 State;

(6) Having an interest in, using, or possessing real property in this State;

(7) Contracting to insure any person, property, or risk located within this State at the time of contracting.

(b) When jurisdiction over a person is based solely upon this section, only a cause of action arising from acts enumerated in this section may be asserted against him; provided, however, nothing contained in this chapter shall limit, restrict or otherwise affect the jurisdiction of any court of this State over foreign corporations which are subject to service or process pursuant to the provisions of any other statute.

The instant case involves three main questions:

(1) Can jurisdiction be asserted under the terms of the statute itself? In other words, do the acts alleged bring the defendant within the terms of the Virginia "long-arm" statute?

(2) If jurisdiction can be so asserted, would this violate the due process considerations of the United States Constitution?

(3) Will the statute be applied retroactively in this case? (It will be noted that the cause of action arose in 1962 and the statute was not passed until 1964.)

The court recognizes the possibility that at the time of the injury plaintiff had no cause of action at all in warranty as the Virginia statute which abolished the requirement of privity in all warranty actions, Va.Code Ann. § 8-654-2 (Cum.Supp.1964), was not passed until 1964, whereas the cause of action arose in 1962. The court overruled defendant's motion to dismiss on this point (failure to state a claim upon which relief may be granted) because it felt that this particular question should be decided at the trial of the case, after the filing of briefs and presentation of evidence, rather than on a pre-trial motion.

From the depositions taken by the defendant it appears that Dille and McGuire handled its sales in Virginia through the medium of independent manufacturer's agents who solicited orders from distributors and forwarded them to Dille and McGuire. The agents, who worked on a commission basis, did not buy the goods themselves but merely submitted orders to defendant's home office. If these orders were accepted, the goods were shipped directly from Dille and McGuire to the customer in Virginia, who then sent payment to Dille and McGuire rather than to the manufacturer's agent who had arranged the sale. Such an arrangement seems to be a fairly common one among manufacturers, and Dille and McGuire found it more economical to handle the distribution of its products in this manner than to set up an extensive sales staff and establish branch offices. All matters of credit were handled at Dille and McGuire's home office by its own credit manager.

As a preliminary matter we must consider the question of whether a Federal District Court may take jurisdiction under the new Virginia statute.

Although there was previously a conflict in the cases on this point (based mainly on the substance-procedure distinction with respect to the Erie doctrine Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188), the answer now is definitely "yes" under the new Federal Rule 4(e) entitled "Service Upon Party Not Inhabitant of or Found Within State." There is no question but that this court can use the Virginia "long-arm" statute to extend its jurisdiction over nonresident defendants.

There has been some confusion in the past as to just what type of action warranty is, as it sounds in contract but has recovery in tort. The problems which this hybrid action might raise with respect to jurisdiction have been eliminated by the draftsman of the "long-arm" statute by the inclusion of a special provision, paragraph (5), supra, for warranty actions.

It seems clear to this court that jurisdiction may be asserted over the defendant in this case under this paragraph of § 8-81.2. It will be noted that it is not necessary for the defendant to be "doing business" in the technical sense to fall within the statute, but only that he be engaged in some persistent course of conduct or derive substantial revenue from goods used in this State.

The court finds from the evidence that the defendant both derived substantial revenue from the sale of lawn mowers in Virginia and engaged in a persistent course of conduct by shipping these mowers directly to the purchasers in this State. It is also clear that the defendant might reasonably have expected plaintiff to use and be affected by the product which he sold in Virginia. The court finds that the Virginia statute authorizes assumption of jurisdiction in this case.

We turn now to the question of whether this court may constitutionally subject the defendant to in personam jurisdiction under the Virginia statute. There has been a trend of constant expansion of personal jurisdiction over non-resident defendants since the United States Supreme Court's decision in International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), and especially since the further development of the theory of International Shoe in McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957). In conjunction with these two decisions the cases of Hess v. Pawloski, 274 U.S. 352, 47 S.Ct. 632, 71 L.Ed. 1091 (1927), and Henry L. Doherty & Co. v. Goodman, 294 U.S. 623, 55 S.Ct. 553, 79 L.Ed. 1097 (1935) should be noted. Using the criteria set down by the Supreme Court as a starting point, several states have significantly expanded the interpretation of their existing statutes, the trend seeming to be in the direction of pushing state jurisdictional power to the outer limits of due process. See, for example: Shealy v. Challenger Mfg. Co., 304 F.2d 102 (4th Cir. 1962); Green v. Robertshaw-Fulton Controls Co., 204 F.Supp. 117 (S.D.Ind.1962); Johns v. Bay State Abrasive Products Co., 89 F.Supp. 654 (D.Md.1950); Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761 (1961); Nelson v. Miller, 11 Ill.2d 378, 143 N.E.2d 673 (1957); Adamek v. Michigan Door Co., 260 Minn. 54, 108 N.W.2d 607 (1961); Shepard v. Rheem Mfg. Co., 249 N.C. 454, 106 S.E.2d 704 (1959); Smyth v. Twin State Improvement Corp., 116 Vt. 569, 80 A.2d 664, 25 A.L.R.2d 1193 (1951).

This court upholds the constitutionality of paragraph (5) of the Virginia "long-arm" statute, as the use of the International Shoe due process words "regularly," "persistent," and "substantial," place this provision well within the permissible limits of due process as set down by the Supreme Court. It will be observed that this language restricts the Virginia statute considerably when compared to the "single act" provisions of the "long-arm" statutes of some...