Gelfand v. Tanner Motor Tours, Ltd.

• Decision Date: 09 December 1964
• Docket Number: No. 83,Docket 28826.,83
• Citation: 339 F.2d 317
• Parties: Nettie GELFAND and Phillip Gelfand, Plaintiffs-Appellants, v. TANNER MOTOR TOURS, LTD. (a California Corporation), Tanner Motor Tours of Nevada, Ltd. (a Nevada Corporation), Tanner Motor Tours Corporation, Limited (a Nevada Corporation), Tanner Motor Tours, Ltd. (a Nevada Corporation), Tanner Motor Tours Ltd. of California (a California Corporation) and Lucky Cab Co. (a Nevada Corporation), Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

339 F.2d 317 (1964)

Nettie GELFAND and Phillip Gelfand, Plaintiffs-Appellants, v. TANNER MOTOR TOURS, LTD. (a California Corporation), Tanner Motor Tours of Nevada, Ltd. (a Nevada Corporation), Tanner Motor Tours Corporation, Limited (a Nevada Corporation), Tanner Motor Tours, Ltd. (a Nevada Corporation), Tanner Motor Tours Ltd. of California (a California Corporation) and Lucky Cab Co. (a Nevada Corporation), Defendants-Appellees.

No. 83, Docket 28826.

United States Court of Appeals Second Circuit.

Argued October 16, 1964.

Decided December 9, 1964.

Fuchsberg & Fuchsberg, New York City (Irving Malchman, Jerome J. Klied, New York City, of counsel), for plaintiffs-appellants.

O'Brien & Sheil, New York City (Denis R. Sheil, William J. Quinlan, New York City, of counsel), for defendants-appellees.

Before WATERMAN, MOORE and SMITH, Circuit Judges.

WATERMAN, Circuit Judge.

Plaintiffs, husband and wife, brought suit against the six defendant corporations in the United States District Court for the Eastern District of New York. Jurisdiction was founded on diversity of citizenship, plaintiffs being residents of New York, while defendants are incorporated and have their principal places of business in Nevada and California. Plaintiffs alleged that while riding from Las Vegas, Nevada to Grand Canyon, Arizona in a bus owned and operated by defendants, they were injured when the bus left the highway and crashed into a rock bank. The first three counts in their complaint were based on negligence, the last three on breach of contract of safe carriage. They sought $1,265,000 in damages.

Three of the defendants moved to dismiss the action on the ground that they were not subject to personal jurisdiction in New York. In support of their motion they submitted identical affidavits by two of their officers which consisted of allegations that they had neither representatives nor offices in New York and that they neither solicited nor transacted business in the state. In opposition to the motion, plaintiffs submitted affidavits describing the purchase of their tickets through the Herren-Rogers Travel Service on Long Island, reciting certain representations by the Gray Line Sight-Seeing Companies, Associated, of which defendants are members, and detailing the alleged business activities of the Gray Line in New York City through Herbert J. DeGraff.

The district court requested these defendants to submit additional affidavits and a copy of the Gray Line tariff. In response, they offered an affidavit by DeGraff relative to his business activities in New York City and his relationship to the Gray Line, an affidavit by an officer of the Gray Line relative to the character of the association and the role of defendants as members, and an affidavit by a partner in Herren-Rogers relative to the particular transaction it had with plaintiffs and the nature of its business generally. Although still somewhat dissatisfied with defendants' presentation, Judge Dooling in a memorandum opinion granted their motion to dismiss the suit. The district court included in its order the three remaining defendants, on the ground that they were mere phantoms. Plaintiffs ask us to reinstate the suit against all six defendants or, at least, to direct a hearing on the question of jurisdiction.

In the absence of a federal statute or rule enlarging the jurisdiction of federal courts, the amenability of a foreign corporation to suit in a diversity case is governed by the constitutionally valid law of the state in which the federal court sits. Arrowsmith v. United Press Int'l, 320 F.2d 219 (2 Cir. 1963). Hence the issue presented by this appeal is to be determined in accordance with New York law, insofar as that law is constitutional.

The relevant portions of New York's new Civil Practice Law and Rules provide:

"§ 301. Jurisdiction over persons, property or status

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

"§ 302. Personal jurisdiction by acts of non-domiciliaries

"(a) Acts which are the basis of jurisdiction. A court may exercise personal jurisdiction over any nondomiciliary, * * * as to a cause of action arising from any of the acts enumerated in this section, in the same manner as if he were a domiciliary of the state, if, in person or through an agent, he:

"1. transacts any business within the state; * * *"

The Civil Practice Law and Rules went into effect on September 1, 1963. This suit was commenced on December 15, 1963, but the accident on which it is based occurred on May 4, 1962. That plaintiffs' cause of action thus accrued before the effective date of the act creates no problem of timing as to § 301, which only continues prior New York law. But as to § 302, which creates a new basis of jurisdiction, we are faced at the outset with the question of whether the new provision was intended to apply to suits commenced after September 1, 1963 based on events which occurred previously, and, if so, whether such retroactive application is constitutional. Fortunately, we are not obliged to prophesy New York doctrine on this question,¹ or to render a hypothetical constitutional judgment based on that prophecy. See generally Note, Retroactive Expansion of State Court Jurisdiction Over Persons, 63 Colum.L.Rev. 1105 (1963). Even if § 302 validly applies to this suit with regard to the question of timing, it does not provide a basis of personal jurisdiction over defendants for other reasons yet to be stated.

§ 301 preserves traditional New York law, under which "a foreign corporation, not authorized to do business in the State, was held amenable to local suit only if it was engaged in such a continuous and systematic course of `doing business' there as to warrant a finding of its `presence' in the jurisdiction." Simonson v. International Bank, supra, 14 N.Y.2d at 285, 251 N.Y. S.2d at 436, 200 N.E.2d at 429. Once a foreign corporation is found to be "present" within the state, however, "jurisdiction does not fail because the cause of action sued upon has no relation in its origin to the business there transacted." Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 268, 115 N.E. 915, 918 (1917). See generally N.Y. Legis.Doc. (1958) No. 13, p. 38. The constitutionality of these doctrines has been approved by the Supreme Court. International Shoe Co. v. State of Washington, 326 U.S. 310, 318, 66 S.Ct. 154, 90 L.Ed. 95 (1945); Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 446, 72 S.Ct. 413, 96 L.Ed. 485 (1952).

On the other hand, § 302 was enacted to take advantage of New York's newly acquired constitutional power, derived from International Shoe Co. v. State of Washington, supra, and its progeny, to subject non-residents to personal jurisdiction based on acts occurring within the state. Simonson v. International Bank, supra, 14 N.Y.2d at 288, 251 N.Y.S.2d at 438-439, 200 N.E.2d at 430, 431. The provision is apparently based on that portion of International Shoe Co. v. State of Washington, supra, 326 U.S. at 318-319, 66 S.Ct. at 159, 90 L.Ed. 95, which holds that "the commission of some single or occasional acts * * * in a state" may be enough to render a person amenable to local suit on causes of action which "arise out of or are connected with the activities within the state." See generally N.Y.Legis.Doc. (1958) No. 13, pp. 39-40. Inasmuch as § 302 was seemingly designed to take full advantage of International Shoe, that decision, in the absence of authoritative pronouncements by the courts of New York, furnishes us with our guide to interpretation of the new provision, and the provision itself need not present us with an independent issue as to its constitutionality.

Plaintiffs' first contention is somewhat apart from § 301 or § 302 as discussed above. They argue that under traditional New York law, a foreign corporation which represents to the public that it is doing business in the state is estopped from denying that fact in order to thwart local jurisdiction. The Gray Line makes such representations in its brochures and its tariff and plaintiffs maintain that these representations are imputable to defendants as members of the association. We find it unnecessary to decide whether a doctrine of jurisdiction by estoppel would apply in this case, for we hold that New York apparently has no such doctrine.

Plaintiffs rely on two New York cases, both over twenty-five years old, which conclude that foreign corporations may be estopped by their public representations from denying that service of process was made upon the proper person under New York law. Society Milion Athena v. National Bank of Greece, 166 Misc. 190, 199, 2 N.Y.S.2d 155, 164 (Sup. Ct. 1937), aff'd, 253 App.Div. 650, 3 N.Y.S.2d 677 (1938); Dreher v. Western Doll Mfg. Co., 198 App.Div. 21, 189 N.Y.S. 422 (1921). It is true that these decisions strongly suggest that the same rule applies to a defense based on lack of presence within the state. But the fact remains that we have not found and have not been cited to any square New York precedents to this effect.

On the contrary, recent New York cases pointing out such representations consider them to be but one of several elements tending to prove that the foreign corporation is doing business in the state. International Business Machs. Corp. v. Barrett Div. Allied Chem. & Dye Corp., 16 A.D.2d 487, 229 N.Y.S.2d 547 (1962); Rochester Happy House, Inc. v. Happy House Shops, Inc., 14 A.D. 2d 491, 217 N.Y.S.2d 791 (1961). Furthermore, there are leading cases involving such representations in which the courts have concluded that the foreign corporation was not subject to personal jurisdiction in New York. Miller v. Surf Properties, Inc., 4 N.Y.2d 475, 176 N.Y.S.2d 318, 151 N.E.2d 874 (1958); MacInnes v. Fontainebleau Hotel Corp., 257 F.2d 832 (2 Cir. 1958).

§ 302 seems to work no change in New York law in this respect. It is true that § 302 was apparently designed to take...