Furman v. General Dynamics Corp.

• Decision Date: 29 January 1974
• Docket Number: No. 73 Civ. 642 and 73 Civ. 1320.,73 Civ. 642 and 73 Civ. 1320.
• Citation: 377 F. Supp. 37
• Parties: Susan G. FURMAN, as Executrix of the Estate of Robert Jay Furman, Deceased, Plaintiff, v. GENERAL DYNAMICS CORP. and McDonnell Douglas Corp., Defendants. Susan G. FURMAN, as Executrix of the Estate of Robert Jay Furman, Deceased, Plaintiff, v. OEA, INC., Defendant.
• Court: U.S. District Court — Southern District of New York

377 F. Supp. 37

Susan G. FURMAN, as Executrix of the Estate of Robert Jay Furman, Deceased, Plaintiff, v. GENERAL DYNAMICS CORP. and McDonnell Douglas Corp., Defendants.

Susan G. FURMAN, as Executrix of the Estate of Robert Jay Furman, Deceased, Plaintiff, v. OEA, INC., Defendant.

Nos. 73 Civ. 642 and 73 Civ. 1320.

United States District Court, S. D. New York.

January 29, 1974.

COPYRIGHT MATERIAL OMITTED

Kreindler & Kreindler, New York City, for plaintiff by Melvin I. Friedman, David Goldstein, James J. Sullivan, New York City, of counsel.

Haight, Gardner, Poor & Havens, New York City, for defendant Gen. Dynamics Corp. by William J. Junkerman, Carroll E. Dubuc, Randal R. Craft, Jr., New York City, of counsel.

Crowe, McCoy & Agoglia, Mineola, N. Y., for defendant McDonnell Douglas Corp. by Harold V. McCoy, Mineola, N. Y., of counsel.

Rogers & Wells, New York City, for defendant OEA, Inc. by William R. Glendon, Thomas W. Towell, Jr., New York City, of counsel.

KEVIN THOMAS DUFFY, District Judge.

These are the last of a series of motions in two related actions for the wrongful death of a thirty-two year old Air Force major; the earlier motions were decided in a memorandum filed July 17, 1973. The actions arose on April 23, 1971, when a military F III E aircraft crashed on a test flight at the Leach Lake Gunnery Range in California, killing co-pilots Robert Jay Furman and James W. Hurt. At the time of the crash, the parachute ejection system apparently malfunctioned, and as a result the canopy of the capsule failed to separate as it was designed to do.

Plaintiff brought a suit in this district against both the manufacturer of the aircraft, General Dynamics Corp., and the manufacturer of the parachute ejection system, McDonnell Douglas Corp., and later filed a separate suit against the manufacturer of the explosive device in the cockpit ejection system, OEA, Inc. Major Hurt's legal representative filed a similar action in the Central District of California.

The two Furman cases were consolidated on July 17, 1973 and ordered transferred to the Central District of California for the sake of convenience pursuant to 28 U.S.C. § 1404(a). The transfer was stayed, however, pending the determination of the two motions which are the subject of this opinion.¹

The first is a motion by OEA to dismiss the complaint for lack of personal jurisdiction. OEA is a Delaware corporation with its principal place of business in Illinois. It is not licensed to do business in New York and claims to do no business here. It was served pursuant to Section 307 of the New York Business Corporation Law, McKinney's Consol.Laws c. 4, and in order for such service to be valid, the corporation must be subject to the jurisdiction of New York State under either Section 301 or Section 302 of the CPLR, McKinney's Consol.Laws, c. 8. Since the cause of action did not arise from any contact OEA might have had with New York, Section 302 is not applicable. Thus the question becomes whether OEA is "doing business" in New York to the extent necessary to subject itself to jurisdiction under Section 301.

In order to resolve this question, the parties have conducted considerable discovery regarding OEA's activities in New York. In addition to manufacturing explosive devices for escape systems in military aircraft, OEA manufactures exit systems for commercial 747 aircraft, as well as other explosive and propellant devices for missiles and weapons systems. During the last four years OEA has shipped approximately $900,000 worth of these products to or through New York. Most of these shipments (amounting to approximately $620,000) were bomb ejectors sold to Boeing Aircraft Corp. of Seattle, Washington, and shipped at its direction, F. O.B. Illinois, to Plattsburgh Air Force Base in Plattsburgh, New York. The remaining shipments were either replacement parts for F-4 jet aircraft, or parts, mainly thrusters, used in connection with the escape chutes of Boeing 747 aircraft. The F-4 parts were sent through New York to various foreign countries and foreign air forces, the orders having usually been placed by a New York procurement office of the foreign government directing that the goods be shipped to overseas freight forwarders located in New York. The parts for the 747s were ordered by various airlines, including many foreign airlines, with directions for delivery to New York, often to the airlines terminal at Kennedy Airport, sometimes for reshipment overseas. All such shipments, whether for F-4 or 747 aircraft, were made F.O.B. Illinois.

In January 1973, OEA appointed Cornhill Commercial Co., Inc. of New York City as its sole representative for overseas sales. Although located in New York, Cornhill does not make any sales in New York but is limited to sales abroad. All orders obtained by Cornhill are sent to and accepted by OEA in Illinois.

In addition, OEA owns three subsidiaries, Mathewson Tool Co., Matco Equipment Co., both located in Orange, Connecticut, and Explosive Technology, Inc. (ET) located in Fairfield, California, of which at least one, ET, does a certain amount of business in New York. ET, like OEA, manufactures explosive parts for government contractors in the aircraft and aerospace industry. ET has sold and continues to sell such parts to Grumman Aircraft Corp., located in Bethpage, New York, pursuant to a contract to supply certain components for an F-14 project. The approximate value of such sales to Grumman is in excess of one million dollars. In addition, ET has regularly submitted and continues to submit proposals for potential sales to Fairchild Industries and General Electric Co., both located in New York. Between November 11, 1970 and March 3, 1973, these New York customers of ET occasioned more than eighty visits to New York by ET officers and employees.

ET also manufactures an item of firefighting equipment known as Jet Axe. ET presently has exclusive franchising agreements with two New York companies for the distribution of Jet Axe. In 1972, Jet Axe sales in New York amounted to $3,500.

Although OEA has no New York office, its officers occasionally travel to New York on business. From early 1970 through October 1973, there were nine such trips, some for the purposes of meeting with officers of Grumman Aircraft to discuss joint bidding on federal contracts, to debrief Grumman's officers on various proposals and to discuss proposals previously submitted to Grumman. The other trips were aimed at increasing business for Mathewson Tool Co. and ET. Despite these trips, Grumman was never a customer of OEA.

Plaintiff maintains that all these contacts with New York collectively constitute "doing business" with sufficient regularity and continuity to make OEA subject to New York's jurisdiction under CPLR § 301. Section 301 states simply that:

"A court may exercise such jurisdiction over persons, property, or status as might have been exercised heretofore."

The statute thus provides no guidance other than a direct referral to the New York decisions defining the circumstances under which a foreign corporation may fairly be expected to defend a law suit in New York not arising from its activities in this state. These decisions must therefore form the necessary framework for any analysis of the plaintiff's case.

The traditional rule in New York has been that in order to come within Section 301 a foreign corporation must have been doing business here "with a fair measure of permanence and continuity." Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 267, 115 N.E. 915, 917 (1917). This has often meant having an office in New York for the purpose of soliciting business and taking orders, as in the Tauza case where a Pennsylvania coal company maintained a New York office with eight salesmen and clerical staff and was consequently held to be doing business in New York. Similarly, in Bryant v. Finnish National Airline, 15 N.Y.2d 426, 260 N.Y.S.2d 625, 208 N.E.2d 439 (1965), the defendant's New York office, although small, was considered sufficient basis to find that it was doing business in New York.² Thus, if OEA had an office in New York for the solicitation of business a court would almost certainly find that it was doing business here; but since OEA has no such office, it becomes necessary to turn to cases where other business contacts formed the basis for jurisdiction.

Where a foreign defendant has no office or employees in New York but is nonetheless selling products or services in New York, the New York courts may exercise jurisdiction if 1) the foreign corporation is operating through a subsidiary or a parent in such a way as to justify piercing the corporate veil or 2) doing business in New York through an agent. Plaintiff maintains that in addition to its direct contacts, OEA is doing business in New York both through its wholly owned subsidiary, ET, and through its sales agent, Cornhill Commercial Co. However, an examination of the law leaves considerable doubt that the New York courts would find in the activities of these corporations a sufficient basis for exercising jurisdiction over OEA.

Generally, a corporation is not subject to jurisdiction in New York because of the activities of its subsidiary. Simonson v. International Bank, 16 A. D.2d 55, 225 N.Y.S.2d 392 (1st Dept. 1962), aff'd, 14 N.Y.2d 281, 251 N.Y.S. 2d 433, 260 N.E.2d 427 (1964). An exception has developed, however, where the subsidiary does not operate as an entirely separate corporation, but rather more as a department of the parent. In Taca International Airlines, S. A. v. Rolls Royce of England, Ltd., 15 N.Y.2d 97, 256 N.Y.S.2d 129, 204 N.E.2d 329 (1965), for example, an American subsidiary was found to be functioning as an incorporated department of its British parent, and the parent was therefore held subject to New York jurisdiction. The British parent owned all the stock of its Canadian subsidiary which, in turn, owned all the stock of the New York...