H. Ray Baker, Inc. v. Associated Banking Corp., 76-2917

• Decision Date: 05 March 1979
• Docket Number: No. 76-2917,76-2917
• Citation: 592 F.2d 550
• Parties: H. RAY BAKER, INC., et al., Plaintiff-Appellant, v. ASSOCIATED BANKING CORP., Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 550

592 F.2d 550

H. RAY BAKER, INC., et al., Plaintiff-Appellant, v. ASSOCIATED BANKING CORP., Defendant-Appellee.

No. 76-2917.

United States Court of Appeals Ninth Circuit.

March 5, 1979.

Joseph C. Barton (argued), of Barton & Stretch, San Francisco, Cal., for plaintiff-appellant.

David L. Kimport (argued), Baker & McKenzie, San Francisco, Cal., for defendant-appellee.

Appeal from the United States District Court for the Northern District of California.

Before HUFSTEDLER and TANG, Circuit Judges, and SMITH, ^* District Judge.

TANG, Circuit Judge:

This is an action on an irrevocable letter of credit issued by the defendant, Associated Banking Corp. (ABC), a Philippine corporation, in favor of H. Ray Baker, Inc. (Baker) an Ohio corporation doing business in California, the proceeds of which were assigned to Interquip Corp. (Interquip), another Ohio corporation doing business in California. The district court dismissed for lack of jurisdiction over ABC. We affirm.

The facts are not disputed. Interquip negotiated with Dura-Tire and Rubber Industries, Inc. (Dura-Tire), a Philippine corporation, for the sale of equipment to Dura-Tire in the Philippines. All of these negotiations were conducted in San Francisco. Dura-Tire caused ABC to issue the irrevocable letter of credit for payment of the equipment. All negotiations between Dura-Tire and ABC were conducted in the Philippines.

The letter of credit originally called for a single shipment and payment in five installments, to be advised through Manufacturer's Hanover Trust Co. of New York. The letter was amended to permit partial shipments. The goods were shipped and the first installment paid by Manufacturer's Hanover Trust Co. Baker then assigned the proceeds of the letter of credit to Interquip and notified ABC of the assignment. Interquip presented the letter of credit for payment at a California bank. The letter was dishonored, purportedly because the equipment did not conform to contract terms.

ABC maintains correspondent banking relationships with six California banks; that is, ABC has non-interest bearing accounts with those banks for the purpose of processing letters of credit and facilitating the transfer of funds between California and the Philippines. ABC is not licensed to do business in California. It maintains no offices or employees or agents in California. Its sole contact with California is the maintenance of its accounts in the six California banks. Transactions regarding these accounts are handled by wire, telephone or mail. No agent or employee of ABC has ever visited California in connection with these accounts.

In a diversity action such as this, the court must perform a two-step jurisdictional analysis: does the state in which the court sits have a long-arm statute which confers jurisdiction, and if so, is that exercise of jurisdiction consistent with due process? Rule 4(e), F.R.Civ.Pro.; Forsythe v. Overmyer, 576 F.2d 779 (9th Cir. 1978) Cert. denied --- U.S. ----, 99 S.Ct. 188, 58 L.Ed.2d 174 (1978); Data Disc, Inc. v. Systems Technology Associates, Inc., 557 F.2d 1280 (9th Cir. 1977). The relevant state statute is Cal.Code Civ.Pro. § 410.10 ¹ which has been interpreted to provide that the limits on the state court's jurisdiction are co-extensive with the outer limits of due process. The two-step analysis therefore collapses into a single inquiry as to what due process permits. Forsythe, supra at 782.

Under a line of cases beginning with International Shoe v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), two types of jurisdiction over non-resident defendants have evolved.

The jurisdictional inquiry focuses on "the relationship among the defendant, the forum, and the litigation." Shaffer v. Heitner (1977) 433 U.S. 186, 204, 97 S.Ct. 2569 2580, 53 L.Ed.2d 683. The defendant must have "certain minimum contacts with (the forum) such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' " International Shoe Co. v. Washington (1945) 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95. The minimum contacts approach is based on a Quid pro quo rationale. "(T) o the extent that a corporation exercises the privilege of conducting activities within a state, it enjoys the benefits and protection of the laws of that state. The exercise of that privilege may give rise to obligations, and, so far as those obligations arise out of or are connected with the activities within the state," it is fair to require the defendant to respond. Id. at 319, 66 S.Ct. at 160.

If the defendant's forum-related activity is "substantial" or "continuous and systematic," the relationship between the defendant and the state is sufficient to support jurisdiction even if the cause of action is unrelated to the defendant's forum activities. Data Disc, Inc. v. Systems Technology Associates, Inc., (9th Cir. 1977) 557 F.2d 1280, 1287. This is sometimes referred to as general jurisdiction over the defendant.

If the defendant's contacts with the forum are insufficient to support general jurisdiction, jurisdiction may still lie if the nature and quality of those activities, considered in relation to the cause of action, make the assertion of jurisdiction fair and reasonable in the particular case. Shaffer v. Heitner, supra, 433 U.S. at 203-04, 97 S.Ct. 2569; International Shoe v. Washington, supra, 326 U.S. at 317-19, 66 S.Ct. 154. In making this evaluation, our Circuit uses the following approach:

'(1) The nonresident defendant must do some act or consummate some transaction with the forum or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws. (2) The claim must be one which arises out of or results from the defendant's forum-related activities. (3) Exercise of jurisdiction must be reasonable.'

(Data Disc, Inc. v. Systems Technology Associates, Inc. supra, 557 F.2d at 1287 (citations omitted).)

Applying these principles to the facts of this case, it is clear that, as ABC's contacts with California were neither substantial nor systematic, general jurisdiction over ABC is lacking.

Since the relationship between ABC and California is not strong enough to confer jurisdiction over ABC for all causes of...