Falkirk Min. Co. v. Japan Steel Works, Ltd.

• Citation: 906 F.2d 369
• Decision Date: 10 August 1990
• Docket Number: Nos. 89-5189,89-5207,s. 89-5189
• Parties: The FALKIRK MINING COMPANY, an Ohio corporation, Appellant/Cross-appellee, v. The JAPAN STEEL WORKS, LIMITED, a corporation of Japan, and Japan Steel Works America, Inc., a New York corporation, Appellees/Cross-appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

Page 369

906 F.2d 369

The FALKIRK MINING COMPANY, an Ohio corporation Appellant/Cross-appellee, v. The JAPAN STEEL WORKS, LIMITED, a corporation of Japan, and Japan Steel Works America, Inc., a New York corporation, Appellees/Cross-appellants.

Nos. 89-5189, 89-5207.

United States Court of Appeals Eighth Circuit.

Submitted March 16, 1990.

Decided June 26, 1990.

Rehearing Denied Aug. 10, 1990.

David S. Evinger, Minneapolis, Minn., for appellant/cross-appellee.

William L. Killion, Minneapolis, Minn., for appellees/cross-appellants.

Before McMILLIAN and BEAM, Circuit Judges, and LARSON, ^* Senior District Judge.

McMILLIAN, Circuit Judge.

The Falkirk Mining Co. (Falkirk) appeals from a final judgment entered in the United States District Court for the District of North Dakota granting the motion to dismiss of Japan Steel Works, Ltd. (Japan Steel), and Japan Steel Works America, Inc. (collectively appellees), on the grounds that Falkirk had failed to state a claim upon which relief could be granted. Appellees cross-appeal from the district court's holding that it could exercise personal jurisdiction over them consistent with due process. We reverse the district court's decision that it possessed personal jurisdiction over appellees, and remand this action to the district court with directions to dismiss the complaint for lack of personal jurisdiction. Falkirk's appeal is dismissed as moot.

I.

On May 27, 1974, Falkirk's parent corporation, the North American Coal Co., an Ohio corporation, entered into a contract with Marion Power Shovel (Marion), a Delaware corporation with its principal place of business in Ohio, for the purchase and construction of a walking dragline crane (dragline) to be used in strip mining coal. Marion does not manufacture all of the component parts for its draglines. ¹ In 1976, Marion agreed to purchase six eccentric cams needed for three draglines from Mitsui & Co. (U.S.A.), Inc. (Mitsui U.S.A.), the American subsidiary of Mitsui & Co., Ltd. (Mitsui), a major Japanese trading company. Mitsui then contracted with Japan Steel, a foreign corporation incorporated under the laws of Japan, ² to manufacture the six cams. ³ Through Mitsui U.S.A., Marion provided Japan Steel with drawings and specifications for the manufacture of the cams. Two of the six eccentric cams Marion ordered were designated for use in the construction and erection of the dragline at the Falkirk Mine.

Marion officials monitored Japan Steel's manufacturing process in Japan to insure compliance with contract specifications and timeliness requirements. Marion officials visited Japan Steel in Japan on three occasions between July 1976 and April 1977. Marion's vice-president of materials visited Japan Steel's production facilities in July 1976. Two months later, two other Marion officials met with Japan Steel officials in Japan to discuss the manufacture of the eccentric cams. On April 4, 1987, a Marion official inspected some samples of Japan Steel's finished work product in Japan.

In October 1978, Japan Steel completed and delivered eccentric cam no. 287C39, the subject of this litigation, to Mitsui in Japan. Mitsui or Mitsui U.S.A. then completed the sale of the cam to Marion. Mitsui U.S.A. transported the cam to Kobe, Japan, where an agent for Marion took delivery. Marion's agent then shipped the cam from Kobe to Seattle, Washington. Another Marion agent then transported the cam from Seattle to North Dakota. Marion paid the cost of shipping the cam from Japan to Seattle and from Seattle to North Dakota.

In June 1979, Marion began constructing the dragline at the Falkirk Mine in North Dakota. The dragline was completed eighteen months later and was put into operation on December 23, 1980. The dragline functioned without incident until December 15, 1985, when eccentric cam 287C39 cracked. Independent metallurgical tests concluded that the crack was caused by improper welding and casting during the manufacturing process. Falkirk allegedly sustained approximately $500,000 damage as a result of the failure, about $426,000 of which was damage to the cam or the dragline's other component parts.

On September 22, 1988, Falkirk filed the instant diversity action against Japan Steel in federal district court, alleging causes of actions for breach of implied and express warranties, negligence, and strict liability. Appellees moved to dismiss on the grounds that the district court lacked personal jurisdiction and that Falkirk had failed to state a claim upon which relief could be granted. ⁴ Falkirk opposed the motion and moved for leave to amend the complaint to substitute Mitsui and Mitsui U.S.A. as defendants in place of Japan Steel Works America. On February 2, 1989, the district court found that it possessed personal jurisdiction over appellees, but granted appellees' motion to dismiss because Falkirk could not recover under any of the theories raised. Falkirk's motion for reconsideration was denied. The district court denied Falkirk's motion for leave to file an amended complaint. ⁵ This timely appeal and cross-appeal followed.

II.

On appeal, Falkirk argues that the district court erred in dismissing its complaint for failure to state a claim. Falkirk contends that the defective cam damaged other property when it cracked and its damages are fully recoverable in tort under North Dakota law. Falkirk further contends that the district court erred in holding that its breach of warranty claim was barred by the statute of limitations. Appellees respond that the district court correctly dismissed Falkirk's complaint for failure to state a legally cognizable claim, but erred in holding that it could assert personal jurisdiction over them consistent with due process. Appellees contend that we need not reach its cross-appeal on the jurisdiction issue if we affirm the district court's dismissal of Falkirk's complaint for failure to state a cognizable claim. We disagree. Before a district court can reach the merits of a dispute and enter legally binding orders, it must determine as a threshold matter whether it possesses personal jurisdiction over the defendants. " '[T]he question of jurisdiction is always vital.' " Land-O-Nod Co. v. Bassett Furniture Industries, Inc., 708 F.2d 1338, 1340 (8th Cir.1983) (Land-O-Nod ) (quoting Eighth Regional War Labor Board v. Humble Oil & Refining Co., 145 F.2d 462, 464 (5th Cir.1944), cert. denied, 325 U.S. 883, 65 S.Ct. 1577, 89 L.Ed. 1998 (1945)). Whether the district court properly exercised personal jurisdiction over appellees requires consideration of a two-part inquiry. We must first determine whether North Dakota's long-arm statute authorized the exercise of jurisdiction over appellees. ⁶ If so, we must then decide whether the district court's exercise of personal jurisdiction violated the due process clause of the fourteenth amendment.

A.

The district court found that North Dakota's long-arm statute authorized the exercise of jurisdiction over appellees. We cannot conclude that this holding constitutes reversible error. ⁷ North Dakota's long-arm statute permits the exercise of jurisdiction over a person who commits a tort within or without the state causing injury to another person or property within the state. N.D.R.Civ.P. 4(b)(2)(C). ⁸ Once a defendant has challenged a federal court's jurisdiction, the plaintiff bears the burden of proving that jurisdiction exists. Scullin Steel Co. v. National Ry. Utilization Corp., 676 F.2d 309, 311 (8th Cir.1982); Aaron Ferer & Sons Co. v. Diversified Metals Corp., 564 F.2d 1211, 1215 (8th Cir.1977). In order to satisfy its burden of proving that N.D.R.Civ.P. 4(b)(2)(C) authorizes the exercise of jurisdiction over appellees, Falkirk need not prove that appellees committed a tort, its substantive cause of action, by a preponderance of the evidence. Rather, Falkirk meets its burden as to the first prong of the personal jurisdiction test "by establishing merely a prima facie cause of action." Jetco Electronic Industries, Inc. v. Gardiner, 473 F.2d 1228, 1232 (5th Cir.1973). Falkirk alleges that Japan Steel's negligent casting and welding of the eccentric cam caused it to crack and damage the dragline, property within the state. Without deciding whether North Dakota would in fact permit Falkirk to recover damages in tort for the failure of the cam, we hold that the North Dakota long-arm statute authorizes the exercise of jurisdiction because Falkirk has alleged a prima facie cause of action in tort sufficient to bring appellees within the ambit of N.D.R.Civ.P. 4(b)(2)(C). ⁹

B.

We next consider whether the district court erred in holding that due process was not violated by subjecting appellees to personal jurisdiction. For the reasons stated below, we hold that the district court erred in holding that appellees could be subjected to personal jurisdiction consistent with due process.

The due process clause limits the power of a state to assert personal jurisdiction over a nonresident defendant. Helicopteros Nacionales De Columbia, S.A. v. Hall, 466 U.S. 408, 413-14, 104 S.Ct. 1868, 1871-72, 80 L.Ed.2d 404 (1984). A state may exercise personal jurisdiction over a nonresident defendant consistent with due process when the defendant has "certain minimum contacts with [the forum state] such that the maintenance of the suit 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) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 342, 85 L.Ed. 278 (1940)). The Supreme Court has held that in order to exercise personal jurisdiction, "it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed.2d 1283 ...