Founding Church of Scientology of Washington, D. C. v. Verlag

• Decision Date: 01 June 1976
• Docket Number: No. 74-1789,74-1789
• Parties: The FOUNDING CHURCH OF SCIENTOLOGY OF WASHINGTON, D. C., Appellant, v. Heinrich Bauer VERLAG et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 429

536 F.2d 429

175 U.S.App.D.C. 402

The FOUNDING CHURCH OF SCIENTOLOGY OF WASHINGTON, D. C., Appellant, v. Heinrich Bauer VERLAG et al.

No. 74-1789.

United States Court of Appeals, District of Columbia Circuit.

Argued Oct. 22, 1975.

Decided June 1, 1976.

Samuel H. Seymour, Washington, D. C., for appellant. Earl C. Dudley, Jr., Arlington, Va., was on the brief for appellant.

Irvin B. Nathan, Washington, D. C., with whom Edgar H. Brenner and Werner Kronstein, Washington, D. C., were on the brief for appellee German Language Publications, Inc.

Before McGOWAN and MacKINNON, Circuit Judges, and McMILLAN, ^* United States District Judge for the Western District of North Carolina.

Opinion for the court filed by Circuit Judge MacKINNON.

MacKINNON, Circuit Judge.

In this diversity action the Founding Church of Scientology of Washington, D. C. ¹ sued (1) the author, editor, publisher, and distributor of an allegedly defamatory article which appeared in the July 1973 edition of the German-language magazine Neue Revue, and (2) an official of the West German federal criminal investigating authority who allegedly aided in the preparation of that publication. ² The district court dismissed the suit on the grounds (1) that it lacked personal jurisdiction over any of the defendants under the District of Columbia "long arm" statute ³ and (2) that suit in the District of Columbia was barred under the doctrine of forum non conveniens. ⁴ Appeal was then filed as to all defendants, but appellant later consented to dismissal as to all appellees except the distributor, a New York corporation, German Language Publications, Inc. (GLP). ⁵ As regards this one remaining appellee we disagree that the action should have been dismissed, and reverse.

Personal Jurisdiction

In order for a court to properly assert personal jurisdiction over a nonresident defendant, service of process over the nonresident must be authorized by statute and be within the limits set by the due process clause of the United States Constitution. International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). In the District of Columbia, the relevant "long arm" statute provides:

(a) a District of Columbia court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a claim for relief arising from the person's

(4) causing tortious injury in the District of Columbia by an act or omission outside the District of Columbia if he regularly does or solicits business, engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed, or services rendered, in the District of Columbia.

D.C.Code § 13-423(a)(4) (1973) (emphasis added).

The District of Columbia "long arm" statute is a slightly modified version of the Uniform Interstate and International Procedure Act, 13 U.L.A. 285, § 1.03 (1975), which was drafted by the National Conference of Commissioners on Uniform State Laws several years after the famous decision in Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761 (1961), interpreted the Illinois long-arm statute to cover a nonresident defendant who had no connection with the state except that it had acted negligently out of state, causing injury within the state. The Uniform Act (and derivatively the D.C.Code) draws back from the limits set by expansive opinions such as Gray, and "was presumably devised to obviate any possible due process objections." Margoles v. Johns, 157 U.S.App.D.C. 209, 213, 483 F.2d 1212, 1216 (1973). Consistent with this intent, section 423(a)(4) requires, in addition to conduct outside the District which causes injury within the District, some other reasonable connection between the District and the defendant. Viewed in light of the statute's history, such a connection sufficient to authorize the assertion of personal jurisdiction over a nonresident defendant can be demonstrated only by proving that the defendant has one of three types of contact with the District and that the connection at least evinces the minimum contact with the District sufficient to satisfy traditional notions of fair play and substantial justice. See International Shoe Co. v. Washington, supra, 326 U.S. at 316, 66 S.Ct. 154, 90 L.Ed. 95.

One way in which this "reasonable connection" can be shown under the Uniform Act and D.C.Code § 13-423(a)(4), is by demonstrating that the defendant has derived "substantial income" from goods used or consumed in the jurisdiction. In the case now before us, GLP has obtained gross revenues in excess of $26,000 over a period of ten months from sales made in the District approximately one percent of its total gross revenues. ⁶ In apparently the only District of Columbia case to interpret this phrase, the court stated that "the test is a qualitative one, that is, a comparison of the revenue relating to the locally used article and total revenue is required." Liberty Mutual Insurance Co. v. American Pecco Corp.,334 F.Supp. 522 (D.D.C.1971). We agree, but feel that the test must embrace more than this. Because their similarly-worded statutes also derive from the Uniform Interstate and International Procedure Act, we think the decisions construing the Maryland ⁷ and Virginia ⁸ "long-arm" statutes are entitled to substantial weight in our consideration. ⁹ In holding that $37,000 worth of window frames sold in Virginia amounted to "substantial revenue" despite the fact that it was only one-half of one percent of the nonresident manufacturer's sales, the Fourth Circuit in Ajax Realty Corp. v. J. F. Zook, Inc., 493 F.2d 818 (4th Cir. 1972), stated the following test:

* * * Although percentage of total sales may be a factor to be considered, it cannot be dispositive, for a small percentage of the sales of a corporate giant may indeed prove substantial in an absolute sense.⁵

5. Conversely, a relatively small absolute amount might be deemed "substantial" where it constitutes a significant percentage of a small corporation's total sales.

On the other hand, it is difficult to identify an absolute amount which ipso facto must be deemed "substantial."

Accord, Egeria, Societa di Navigazione Per Azioni v. Orinoco Mining Co., 360 F.Supp. 997, 1002 (D.Md.1973). ¹⁰ Thus the test looks both at the absolute amount and at the percentage of total sales, and determines what is "substantial" on the facts of each case. Here, recognizing the low unit price of each magazine, we think that sales of $26,000 in ten months constitute "substantial revenue" and demonstrate contacts that are sufficiently substantial to establish the "reasonable connection" with the District required by D.C.Code § 13-423 and the Constitution.

In denying personal jurisdiction over the defendants in this case, the district judge cited Margoles v. Johns, supra, a 1973 decision of this court, in which we affirmed a denial of personal jurisdiction under D.C.Code § 13-423 in a libel action against a nonresident newspaper publisher who maintained only what are essentially news gathering offices in the District. The ground for our refusal to find jurisdiction under section (a)(4) of the "long arm" statute in that case was what has become known in the District of Columbia as the "newsgathering exception": in minimal contact situations, the First Amendment protects newsgathering activities in the nation's capital and weighs against the assumption of personal jurisdiction over a nonresident publisher. See also Bulletin Co. v. Origoni, 128 U.S.App.D.C. 282, 387 F.2d 240, cert. denied, 389 U.S. 928, 88 S.Ct. 287, 19 L.Ed.2d 278 (1967); Layne v. Tribune Co., 63 App.D.C. 213, 71 F.2d 223, cert. denied, 293 U.S. 572, 55 S.Ct. 83, 79 L.Ed. 670 (1934); Neely v. Philadelphia Inquirer Co., 61 App.D.C. 334, 62 F.2d 873 (1932). Appellee here contends that this exception is broad enough to cover news dissemination as well as newsgathering, since the former "is surely more at the core of guaranteed First Amendment rights than news gathering." ¹¹ We disagree.

The purpose of the newsgathering exception was well expressed by the opinion that established it As the seat of national government, Washington is the source of much news of national importance, which makes it desirable in the public interest that many newspapers should maintain vigilant correspondents here. If the employment of a Washington correspondent, the announcement of his address, and the payment of his office rent, subjects a non-resident newspaper corporation to legal process in Washington for matter appearing in its paper at home, it would bring in nearly every important newspaper in the nation, and many foreign publishing corporations, which in our opinion the present statute does not do.

Neeley v. Philadelphia Inquirer Co., supra at 875. Thus what is being protected by the news gathering exemption is the right of subscribers within the area of immediate circulation of a newspaper or magazine ¹² to receive news of national interest which must be gathered in the District of Columbia. This is quite different from interpreting the exemption to protect the right of a publisher to distribute his product without responsibility in foreign jurisdictions. To subject a nonresident publisher to suit in the District merely because he gathers news here for dissemination elsewhere would severely constrict the flow of national news to his local subscribers. Viewed this way, however, the newsgathering exception would not prohibit suits against publishers whose area of immediate circulation includes the District, nor against those who distribute publications in the District which have an area of primary circulation elsewhere. In the former case, the publisher is essentially a local publisher and should be subject to suit here; in the latter case, the suit, being against the importing distributor rather than the publisher, will have no effect on the primary distribution of the newspaper or magazine.

In the...