Hendrickson v. Reg O Co.

• Citation: 657 F.2d 9
• Decision Date: 03 August 1981
• Docket Number: No. 80-2751,80-2751
• Parties: Charles Winston HENDRICKSON and Cecillia Anne Hendrickson, v. REG O COMPANY, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

Page 9

657 F.2d 9

Charles Winston HENDRICKSON and Cecillia Anne Hendrickson, v. REG O COMPANY, Appellant.

No. 80-2751.

United States Court of Appeals, Third Circuit.

Argued April 29, 1981.

Decided Aug. 3, 1981.

R. Eric Moore (argued), O'Brien & Moore, Christiansted, St. Croix, V. I., for appellant.

Thomas Alkon, Christiansted, St. Croix, V. I., for appellee.

Before ADAMS, WEIS and GARTH, Circuit Judges.

OPINION OF THE COURT

WEIS, Circuit Judge.

In this products liability case, we measure the length of the Virgin Islands long arm statute by its own terms, as well as by those of constitutional dimension. Although not physically present in the Islands, the defendant, an Illinois corporation, made various small but continuing direct sales in the Islands over a period of years. It maintained relationships with its Virgin Islands customers by mailing catalogues and price lists, as well as through long distance telephone calls that provided counseling on proper servicing of its equipment. We agree with the district court's conclusion that the corporation's activities constituted sufficient contacts to satisfy both statutory and due process considerations. Accordingly, we affirm.

In November 1979, the plaintiff, a resident of St. Croix, brought suit in the District Court of the Virgin Islands to recover for injuries from an explosion caused by an allegedly defective valve on a propane tank. The valve was manufactured by the defendant Reg O Company, a Delaware corporation with its principal office in Chicago, Illinois. Jurisdiction was based on the Virgin Islands long arm statute, 5 V.I.C. § 4903 (Equity 1967). The district court denied the defendant's motion to dismiss for lack of personal jurisdiction, and then certified the issue for appeal under 28 U.S.C. § 1292(b) (1976).

For the purpose of resolving the jurisdictional question, two uncontested affidavits were submitted to the court. These, together with the complaint, established that the accident occurred on St. Croix in December 1978 during the course of plaintiff's employment with the Carib Gas Corporation, when propane gas escaped from one of Carib's tanks through a valve manufactured by the defendant.

Reg O Company manufactures, distributes, and sells component parts for propane cylinders. The company's total annual sales are in excess of 35 million dollars. It has no offices, agents, or distributors in the Virgin Islands, and is not registered to do business there.

At the time suit was instituted, the Gas Company had about $221,500 worth of Reg O equipment either in use or in inventory, and Carib's competitors in the territory had at least that much. The Gas Company purchased most of this equipment from two of Reg O's independent distributors, as well as from Carib's parent corporation, National Propane Company.

Carib also made some direct purchases from Reg O in previous years. In calendar 1978, for example, there were seven separate direct sales to the Virgin Islands with an aggregate value of $1,292.73. These parts were shipped to the Islands by air parcel post or air freight. In 1979, there was one no charge transaction with Carib. In fiscal year May 1977 through May 1978, however, direct purchases by the Gas Company totaled $3,197.32.

In addition to direct and indirect sales, Reg O regularly sent catalogues, bulletins, and price sheets to Carib Gas, as well as blue prints of the equipment to assist the user. There was substantial correspondence between the two companies, and on various occasions Carib would call Reg O's customer representatives to discuss repair and servicing of its equipment.

The district court determined that Reg O had engaged in a persistent course of conduct within the meaning of the Virgin Islands long arm statute, and had also derived substantial revenue from goods used in the Virgin Islands. 5 V.I.C. § 4903(a)(4). In rejecting the constitutional challenge, the court held that Reg O purposefully served the territory and that its direct and indirect activities were such that it could reasonably anticipate being amenable to the Islands' jurisdiction.

On appeal, the defendant contends that the court ignored the statute's requirement that the persistent conduct occur "in this territory." Instead, it is argued, the court focused on Reg O's action in placing its goods in interstate commerce, and found this sufficient to permit the exercise of the court's jurisdiction. The defendant also asserts that its average annual direct sales in the territory for the preceding five years $1,800 did not constitute substantial revenues, and that the existence of over $200,000 worth of equipment there did not justify an inference of receipt of other revenues. Finally, the defendant argues that there were no constitutionally cognizable contacts with the jurisdiction.

The challenges to the district court's order are based on both statutory and constitutional grounds. Because it would not be necessary to reach the constitutional issue if the defendant's position on the statutory question is upheld, we will discuss that matter first. Hagans v. Lavine, 415 U.S. 528, 94 S.Ct. 1372, 39 L.Ed.2d 577 (1974).

The pertinent portion of the Virgin Islands long arm statute provides that:

"A 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 this territory by an act or omission outside this territory if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenues from goods used or consumed or services rendered, in this territory...."

5 V.I. § 4903(a)(4).

The statute is identical in all significant respects to Article I of the Uniform Interstate and International Procedure Act, 13 Unif.L.Ann. § 1.03, and was enacted in the Virgin Islands in 1965. Jensen v. McInerney, 299 F.Supp. 1309 (D.V.I.1969) (Maris, J.). The Commentary to § 1.03(a)(4) of the Uniform Act, which parallels the Virgin Islands provision, states that the exercise of jurisdiction is authorized when the tortious act takes place outside, but the injury occurs within, the forum, and some other reasonable connection between the forum and the defendant is present. "A sufficient nexus exists if (a) the defendant regularly advertises his products or services in a state or (b) carries on some other continuous course of activity there or (c) derives substantial revenue from goods used or consumed or from services rendered in the state. It is not necessary that this activity amount to the doing of business." § 1.03, 13 Unif.L.Ann. at 468.

The course of conduct which establishes jurisdiction need have no relationship to the tortious action. Gatewood v. Fiat S.p.A., 617 F.2d 820 (D.C.Cir.1980). It is the totality of a defendant's connections with the forum state that must be considered. In some cases, for example, the facts may not establish that a defendant does business, or that, considered in isolation, revenues derived are substantial. When the defendant's conduct is viewed as a whole, however, a sufficient nexus may be found. See Columbia Metal Culvert Co. v. Kaiser Industries Corp., 526 F.2d 724, 728 (3d Cir. 1975) (interpreting Pennsylvania statute).

Although each category in § 4903(a)(4) will independently support jurisdiction, all three may also be considered in combination. Thus, a defendant's activities, including a course of conduct, soliciting business, and deriving revenue from goods being used in the territory, may be sufficient cumulatively to establish a jurisdictional presence, even though no single element would suffice.

In the case at hand, the defendant argues that annual direct sales averaging $1,800 are insubstantial when contrasted with the company's annual sales of $35,000,000. The test of substantiality, however does not depend upon a comparison with the defendant's total sales, otherwise the statute would favor multibillion dollar corporations over those with smaller sales volumes. See Gatewood v. Fiat, S.p.A., supra; Ajax Realty Corp. v. J. F. Zook, 493 F.2d 818, 821 (4th Cir. 1972). A ratio test would also put a party at a disadvantage in attempting to establish jurisdiction over a tortfeasor that is a gigantic corporation, and might even raise equal protection difficulties. The substantiality of the revenues must be measured by objective factors, not the size of the defendant. The volume of sales here, although slight in terms of its percentage of total sales, were not isolated or exceptional occurrences, but were part of a regular course of dealing. Cf. Norman's on the Waterfront v. West Indies Corp., 10 V.I. 495 (D.V.I.1974).

The record not only establishes that the defendant maintained contact with users of its products in the Virgin Islands through direct sales, but also that it solicited business by sending catalogues, price lists, and bulletins, and supplied technical advice by telephone on servicing its equipment in use on the Islands. This is solicitation of a more personal and direct nature within the jurisdiction than advertising in nationally circulated publications printed outside the territory and circulated on the Islands. Vencedor Manufacturing Co. v. Gougler Industries, Inc., 557 F.2d 886, 891 (1st Cir. 1977). Cf. Scheidt v. Young, 389 F.2d 58 (3d Cir. 1968) (advertising in a New York newspaper distributed in forum state without more not sufficient conduct of defendant to establish jurisdiction).

The defendant's method of promoting its products evidences solicitation of business, and provides a reasonable connection between the defendant and the forum, even though the defendant does not personally appear in the jurisdiction. This business seeking activity, combined with the company's continuing sales of its products to the Islands, also establishes a persistent course of conduct that was both voluntary and profitable. We are persuaded that the...