IND. SD NO. 454, FAIRMONT, MINN. v. Marshall & Stevens Co.

• Decision Date: 03 December 1971
• Docket Number: No. 4-71-Civ. 135.,4-71-Civ. 135.
• Citation: 337 F. Supp. 1278
• Parties: INDEPENDENT SCHOOL DISTRICT NO. 454, FAIRMONT, MINNESOTA, Plaintiff, v. MARSHALL AND STEVENS COMPANY, a Delaware Corporation, Defendant and Third Party Plaintiff, v. STATISTICAL TABULATING CORPORATION, a Delaware Corporation, Third Party Defendant.
• Court: U.S. District Court — District of Minnesota

337 F. Supp. 1278

INDEPENDENT SCHOOL DISTRICT NO. 454, FAIRMONT, MINNESOTA, Plaintiff, v. MARSHALL AND STEVENS COMPANY, a Delaware Corporation, Defendant and Third Party Plaintiff, v. STATISTICAL TABULATING CORPORATION, a Delaware Corporation, Third Party Defendant.

No. 4-71-Civ. 135.

United States District Court, D. Minnesota, Fourth Division.

December 3, 1971.

COPYRIGHT MATERIAL OMITTED

Charles R. Zierke, Erickson, Zierke, Kuderer, Utermarck & Sinor, Fairmont, Minn., for plaintiff.

Harding Orren and Stephen Cohen, Robins, Davis & Lyons, Minneapolis, Minn., for defendant and third party plaintiff.

Norman R. Carpenter, Faegre & Benson, Minneapolis, Minn., for third party defendant.

MEMORANDUM DECISION

LARSON, District Judge.

This action is presently before the Court on a motion by the third party defendant Statistical Tabulating Corporation (hereinafter referred to as S.T.C.) to quash the service of process made upon it by the defendant Marshall and Stevens Company. The matter was argued to the Court on September 27, 1971.

Plaintiff is a Minnesota corporation with its principal place of activity in Fairmont, Minnesota. Defendant is a Delaware corporation with principal place of business in California. Defendant is licensed to conduct business activities in Minnesota and maintains a full time office in Minneapolis. Third party defendant S.T.C. is a Delaware corporation with principal place of business in Chicago, Illinois. S.T.C. is not qualified to do business in Minnesota and, although at one time it did maintain a small office in Minneapolis, it no longer does so.

The dispute between plaintiff and defendant arose out of a contract between them whereby defendant agreed to make an appraisal, for insurance purposes, of a junior high school building owned by plaintiff. Plaintiff claims that it insured the building for the amount recommended by defendant, that shortly thereafter the building was destroyed by fire, and that the insurance coverage was grossly inadequate to cover the damage caused by the fire. Plaintiff sued the insurance company and recovered the face amount of the policy, but claims that this amount was almost one million dollars less than the total damage caused by the fire.

In order to recover this alleged deficiency, plaintiff filed the instant action against defendant, claiming that defendant was negligent in appraising plaintiff's building and that defendant breached warranties to plaintiff by providing plaintiff with this allegedly inaccurate appraisal. Defendant answered the complaint by denying liability, and further by stating that even if it were found to be liable to plaintiff, the real culprit is S.T.C. Defendant therefore filed a third party complaint against S. T.C., alleging that in making the appraisal of plaintiff's building it relied on certain computations and calculations provided by S.T.C., and that these computations and calculations were incorrect. Defendant contends that S.T.C. performed these computations in a negligent manner and that S.T.C. breached warranties to defendant by providing defendant with these allegedly inaccurate computations. S.T.C. was personally served with the summons and complaint in Chicago pursuant to the Minnesota longarm statute, M.S. § 543.19.¹

S.T.C. has not yet answered the third party complaint. Instead, it filed the instant motion to quash the service of process upon it. It claims that this Court cannot lawfully exercise personal jurisdiction over S.T.C.

This motion presents two issues for the Court's determination:

(1) Whether under the circumstances of this case personal service of process upon S.T.C. in Chicago was authorized by M.S. § 543.19; and

(2) If so, whether exercise of personal jurisdiction over S.T.C. by this Court would violate the Due Process Clause of the Fourteenth Amendment to the United States Constitution.

Ordinarily this Court, in ruling on a motion of this type, would first decide the statutory issue and then, only if the statute were satisfied, would it face the constitutional issue. In the instant case, however, the statutory questions which are raised are substantial and have never been dealt with by the Minnesota Supreme Court.² This Court has serious doubts as to whether all of the provisions of the statute have been complied with; the Court, however, also has serious doubts as to whether the Minnesota Supreme Court would interpret the statute in the same manner. Therefore, in order to avoid speculation concerning the interpretation that the Minnesota Supreme Court would give to this statute, and because this Court has determined that the exercise of personal jurisdiction over S.T.C. in this case would violate due process, the Court will not rule on the statutory issue but will turn directly to the constitutional issue.³

The United States Supreme Court in a number of decisions has discussed the question of whether the exercise of personal jurisdiction over a nonresident defendant violates due process. An excellent discussion of these decisions can be found in the Eighth Circuit Court's opinion in Aftanase v. Economy Baler Co., 343 F.2d 187, 195-197 (8th Cir. 1965), and therefore need not be repeated here. It is sufficient to note, for purposes of this proceeding, that in order for the exercise of personal jurisdiction over a nonresident defendant to comply with due process, the defendant must have had "certain minimum contacts with ... the forum State such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). It should also be noted that in Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958), the Supreme Court stated that:

"It is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." 357 U.S. at 253, 78 S.Ct. at 1240.

After summarizing the Supreme Court decisions, the Court in Aftanase noted that these decisions establish only general and not precise guidelines, and that each case must be decided on its own facts. The Court, however, did observe that certain factors are considered by the Supreme Court to be more important than others. The Court stated:

"At one time or another in the opinions, three primary factors, namely, the quantity of the contacts, the nature and quality of the contacts, and the source and connection of the cause of action with those contacts, are stressed, and ... two others, interest of the forum state and convenience, receive mention." 343 F.2d at 197.

In the instant case defendant alleges that S.T.C. has had a number of contacts with the State of Minnesota. Each of these alleged contacts will now be examined in light of the above principles.

First, defendant contends that the processing of the calculations by S. T.C. constituted a contact with Minnesota because the calculations concerned property which was located in Minnesota. An analysis of the nature and quality of this alleged contact, however, has convinced this Court that if indeed this processing can be considered a contact with Minnesota, it is at best an extremely tenuous one. The processing was done by S.T.C. in either Chicago or New York. The negotiations between S.T.C. and defendant concerning this processing took place in either Chicago or New York. All of the exchanges of information necessary to complete the calculations were accomplished in Chicago or New York. No allegation is made that S.T.C. ever had any direct dealings with the Minneapolis office of defendant. Indeed, it is quite clear that there were none. It appears that the negotiations proceeded in the following manner: plaintiff dealt with defendant's Minneapolis office, the Minneapolis office forwarded the necessary information to one of defendant's non-Minnesota offices, this non-Minnesota office made all of the arrangements and exchanges with S.T.C. and the non-Minnesota office then returned all of the necessary information to the Minneapolis office.

An analysis of the cases and articles dealing with this subject reveals that there are essentially two types of situations in which a single act by a nonresident, who has not entered the forum State, is considered to be a significant contact with the forum State.

(a) The first of these involves the situation where the nonresident has entered into a contract with a resident of the forum State. If any part of the contract was or is to be performed in the forum State, the courts will usually find that this constitutes a contact by the nonresident with the forum State.⁴ This, however, was not the situation in the instant case. Although because it has a Minneapolis office defendant might be considered to be a resident of Minnesota for some purposes,⁵ for purposes of its dealings with S.T.C. defendant clearly cannot be considered to have been acting as a Minnesota resident. As noted above, all of the negotiations, arrangements, transactions and exchanges between defendant and S.T.C. took place outside of Minnesota and were between S.T.C. and one of defendant's offices in either Chicago or New York. Furthermore, it appears that the bills for S.T. C.'s services were sent to the New York or Chicago offices and payment was remitted by one of those non-Minnesota offices. Defendant's Minneapolis office had no contact whatsoever with S.T.C. Thus, it seems clear that in its dealings with S.T.C. defendant cannot be considered to have been acting as a Minnesota resident. Also, from the above discussion it is equally clear that no part of the contract between defendant and S. T.C. was to be performed in Minnesota.

(b) The second type of situation in which a single act by a nonresident, who has not entered the forum State, is considered to be a significant contact with the forum...