Hugel v. McNell, 88-1528
| Decision Date | 04 October 1988 |
| Docket Number | No. 88-1528,88-1528 |
| Citation | 886 F.2d 1 |
| Parties | Max HUGEL, Plaintiff, Appellee, v. Thomas R. McNELL, et al., Defendants, Appellants. . Heard |
| Court | U.S. Court of Appeals — First Circuit |
John S. Whitman with whom Richardson & Troubh, Portland, Me., was on brief, for appellants.
Mark W. Dean with whom Matthias J. Reynolds and Devine, Millimet, Stahl & Branch Professional Ass'n., Manchester, N.H., were on brief, for appellee.
Before BOWNES and BREYER, Circuit Judges, BROWN, * Senior Circuit judge.
Though the saga of the Hugel/McNell feud takes many twists and turns as does a good novel, we are faced with a very real problem which cuts to the heart of a federal court's ability to practice its trade, namely personal jurisdiction. The McNells challenge a default judgment against them in the District of New Hampshire District Court on the grounds that the court did not have personal jurisdiction over them. As sources of information leading to the publication of an article in the Washington Post which forced Hugel to resign his post as Deputy Director of Operations of the Central Intelligence Agency, the McNells argue that the default judgment against them is void for lack of personal jurisdiction. They assert that they do not have sufficient minimum contacts within the state of New Hampshire to support personal jurisdiction under N.H.Rev.Stat. p 510:4. 1
Additionally, the McNells urge that service of process was insufficient and the district judge abused his discretion in denying F.R.Civ.P. 60(b) relief.
The relationship between Hugel and the McNells could easily be the basis of a television mini-series. We will confine our rendition of the facts to the bare minimum required for our review of the instant litigation leaving interested readers in suspense until the release of the mini-series.
Hugel and Sam McNell entered into a limited partnership for the purpose of buying and selling securities. In the course of their business relationship, Hugel loaned Sam $377,000 which was secured by some Maine real estate. By September 1974 Hugel and Sam had terminated the limited partnership, and Hugel's relationship with both Sam and Tom McNell had gone sour. Sam's debt to Hugel remained unpaid, and Sam failed to pay Hugel proceeds of the insurance policy Sam collected when the house on the property securing the loan burned down.
In 1981, the bad blood between the McNells and Hugel still boiling, Tom McNell met with 2 Washington Post reporters and discussed allegations that Hugel was involved in illegal securities transactions. Hugel by that time had left his executive position with a New Hampshire corporation after his being appointed Deputy Director of Administration for the CIA. Tom gave the Washington Post reporters tapes of phone conversations with Hugel. Sam McNell also met with the reporters and substantiated allegations about Hugel.
The Washington Post on July 14, 1981 printed a front page article under the headline "CIA Spymaster Accused of Improper Stock Practices." The article was based on the tapes and information the McNells had provided. The Hugel story was quickly disseminated throughout the country via national news services and TV and radio networks. After this media blitz, Hugel resigned his CIA position. On the same day the McNells disappeared.
On November 3, 1982 Hugel filed the instant diversity suit against the McNells in the District of New Hampshire alleging two counts of defamation slander (Count I) and libel (Count II). Recognizing that neither of the McNells were residents of the Granite State (New Hampshire), Hugel filed a motion for service without the state and requested service by publication. Thereafter process was served by filing on the Secretary of State, sending a copy of service to the McNells at their last known abodes, publication for three consecutive weeks in The New York Times and Asbury Park Press, and nationwide distribution of 2 press releases by United Press International.
The McNells, still in hiding, did not respond to Hugel's complaint. On February 24, 1983 a default judgment was entered against the McNells, and after a hearing on damages the district court on September 25, 1984 issued a judgment awarding Hugel $931,000.
In May 1987 the McNells surfaced--with the help of California law enforcement officers--and faced criminal charged of conspiracy to defraud the U.S. Government and interstate transportation of stolen goods. The McNells pleaded guilty and were sentenced to prison terms for these crimes.
On November 7, 1987 the McNells moved for relief from Hugel's default judgment under F.R.Civ.P. 60(b)(6). After a hearing, the district judge denied the motion and the McNells appeal that denial. Meanwhile, Hugel seeks Rule 11 sanctions against the McNells' legal counsel.
On appeal the McNells argue that (i) the district court lacked personal jurisdiction over them; (ii) insufficient service of process violated their rights to due process; and (iii) the district judge abused his discretion in denying their Rule 60(b)(6) motion for relief from judgment.
In determining whether personal jurisdiction was properly asserted over the McNells, the district judge first looked at the New Hampshire long arm statute. That statute confers jurisdiction over non-resident defendants who themselves or through an agent commit a tortious act in New Hampshire. N.H.Rev.Stat. p 510:4(I). It is settled New Hampshire law that a party commits, for jurisdictional purposes, a tortious act within the state when injury occurs in New Hampshire even if the injury is the result of acts outside the state. Tavoularis v. Womer, 123 N.H. 423, 426, 462 A.2d 110, 112 (1983) (citing Hall v. Koch, 119 N.H. 639, 406 A.2d 962 (1979)). Therefore, even though the McNells' alleged acts of slander and libel actually took place physically outside the New Hampshire state lines, the district court properly found that the long arm statute applies because the complaint alleged that the McNells' defamation of Hugel resulted in injury to his business reputation within New Hampshire. Having passed that hurdle, we must proceed to the federal constitution to consider whether the New Hampshire federal court's assertion of personal jurisdiction over the McNells violates the due process clause under "traditional notions of fair play and substantial justice." 2
Personal jurisdiction, and specifically the constitutionality of State application of long arm statutes, is a topic which over the years has puzzled first year law students and learned jurists alike. The instant case adds yet another dimension to the puzzle.
In Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed.2d 1283, 1298 (1958), the Supreme Court instructed that a defendant corporation who "purposefully avails itself of the privilege of conducting activities within the forum State" has sufficient "minimum contacts" so that it can be haled into court within the forum State without violating the guarantees of due process. We then learned that foreseeability alone is not enough for a forum State to assert personal jurisdiction, World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 295-96, 100 S.Ct. 559, 566, 62 L.Ed.2d 490, 501-01 (1980) unless it "asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State." Id. at 297-98, 100 S.Ct. 559, 567, 62 L.Ed.2d 490, 502. Thus, in the so-called "stream of commerce" cases, courts must focus on the acts of the non-resident defendant to see if the defendant has a "substantial connection" with the forum State to support an assertion of personal jurisdiction. McGee v. Int'l Life Ins. Co., 355 U.S. 220, 223, 78 S.Ct. 199, 201, 2 L.Ed.2d 223, 226 (1957); Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S.Ct. 2174, 2183-84, 85 L.Ed.2d 528, 542-43 (1985). The actions by the defendant must be "purposefully directed toward the forum State." Asahi Metal Indus. Co. v. Superior Court of California, 480 U.S. 102, 112, 107 S.Ct. 1026, 1033, 94 L.Ed.2d 92, 104 (1987) (plurality opinion) (citing Burger King, 471 U.S. 462, 476, 105 S.Ct. 2174, 2184, 85 L.Ed.2d 528, 543; Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774, 104 S.Ct. 1473, 1478, 79 L.Ed.2d 790, 797 (1984)).
In its most recent tangle with a State long arm statute and the minimum contacts required to constitutionally assert personal jurisdiction, the Court proclaimed:
The placement of a product into the stream of commerce without more, is not an act of the defendant purposefully directed toward the forum State. Additional conduct of the defendant may indicate an intent or purpose to serve the market in the forum State.... But a defendant's awareness that the stream of commerce may or will sweep the product into the forum State does not convert the mere act of placing the product into the stream into an act purposefully directed toward the forum State.
Asahi, 480 U.S. 102, 112, 107 S.Ct. 1026, 1033, 94 L.Ed.2d 92, 104.
Unlike the products liability cases from which most of the Supreme Court's pronouncements on personal jurisdiction and the application of state long arm statutes have evolved, the case at bar involves the intentional tort of defamation. The district court relied on Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984) to determine that the McNells had the requisite minimum contact with the State of New Hampshire to enable it to assert personal jurisdiction over the McNells. In Calder the Supreme Court considered the plight of an editor and reporter of the National Enquirer, a Florida corporation which publishes a weekly newspaper with nationwide circulation. The reporter and editor, Florida residents, were defen...
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