Jackson v. National Linen Service Corporation

• Decision Date: 28 December 1965
• Docket Number: Civ. A. No. 64-C-63-A.
• Citation: 248 F. Supp. 962
• Court: U.S. District Court — Western District of Virginia
• Parties: Fred W. JACKSON v. NATIONAL LINEN SERVICE CORPORATION, and Hysan Products Company.

248 F. Supp. 962

Fred W. JACKSON v. NATIONAL LINEN SERVICE CORPORATION, and Hysan Products Company.

Civ. A. No. 64-C-63-A.

United States District Court W. D. Virginia, Abingdon Division.

December 28, 1965.

Bradley Roberts, Stant & Roberts, Bristol, Va., for Fred W. Jackson.

Robert B. Davis, Bristol, Va., for National Linen Service Corp.

G. R. C. Stuart, Penn, Stuart & Miller, Abingdon, Va., for Hysan Products Co.

DALTON, Chief Judge.

This is an action in warranty in which plaintiff, a citizen of Virginia, seeks recovery against defendant Hysan, incorporated under the laws of Illinois, and defendant National Linen Service, incorporated under the laws of Delaware, for injuries sustained when "Zep Flo", a solvent manufactured by Hysan and distributed by National Linen, exploded while plaintiff was using it to unstop a sink trap. The product was sold to plaintiff, the maintenance supervisor for Bristol Redevelopment and Housing Authority, by a salesman of National Linen Service Corporation.

Plaintiff seeks judgment against the defendants, jointly and severally, in the sum of $75,000.

On February 12, 1965, defendant Hysan filed a motion to dismiss, alleging that the complaint does not state a claim upon which relief can be granted and that Va.Code Ann. § 8-81.2 (Supp. 1964), does not authorize this court to assert jurisdiction over it in this case.

According to Mr. Joel Brownstein, the Vice-President of Hysan Products, that company is a "private label business," and "Zep Flo" is a "private label name name or product" which Hysan makes and sells to National Linen for National Linen. (Deposition of Joel Brownstein, p. 53). The court interprets Mr. Brownstein's testimony as meaning that the two companies are entirely independent; that is, that National Linen does not sell on a consignment or agency basis, but rather buys the product outright, after which time it has no connection with Hysan with respect to sales and distribution.

From the evidence, it seems that Hysan Products kept no organization whatsoever (i. e., no office, salesmen, etc.) in the State of Virginia, but from time to time it did fill orders directly to Virginia customers and sent advertising brochures to these customers. (Deposition of Joel Brownstein, pp. 3, 5, 22, and 28.) As near as Mr. Brownstein was able to estimate, Hysan's average annual sales for the period in question were between four and five million dollars, about twenty-five thousand dollars of which was derived from sales in Virginia (the twenty-five thousand dollar figure would be a maximum figure). (Deposition of Joel Brownstein, pp. 6 and 46.) Brownstein testified that there were several other states in the same category, with respect to percentage of total sales, as Virginia. (Deposition of Joel Brownstein, p. 46.) The court assumes from the way in which this evidence was presented that this represents Hysan's direct sales to Virginia customers, and does not take into account the sale of Hysan products which may have originally been sold to independent companies such as National Linen.

The jurisdictional statute involved is Virginia's new "long-arm" statute, Va. Code Ann. § 8-81.2 (Supp.1964), enacted by the General Assembly on March 31, 1964. This section of Chapter 4.1 reads as follows:

When personal jurisdiction over person may be exercised

(a) A court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a cause of action arising from the person's

(1) Transacting any business in this State;

(2) Contracting to supply services or things in this State;

(3) Causing tortious injury by an act or omission in this State (4) Causing tortious injury in this State by an act or omission outside this State if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in this State;

(5) Causing injury in this State to any person by breach of warranty expressly or impliedly made in the sale of goods outside this State when he might reasonably have expected such person to use, consume, or be affected by the goods in this State, provided that he also regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in this State;

(6) Having an interest in, using, or possessing real property in this State;

(7) Contracting to insure any person, property, or risk located within this State at the time of contracting.

(b) When jurisdiction over a person is based solely upon this section, only a cause of action arising from acts enumerated in this section may be asserted against him; provided, however, nothing contained in this chapter shall limit, restrict or otherwise affect the jurisdiction of any court of this State over foreign corporations which are subject to service or process pursuant to the provisions of any other statute.

The instant case involves three main questions:

(1) Can jurisdiction be asserted under the terms of the statute itself? In other words, do the acts alleged bring the defendant within the terms of the Virginia "long-arm" statute?

(2) If jurisdiction can be so asserted, would this violate the due process considerations of the United States Constitution?

(3) Will the statute be applied retroactively in this case? (It will be noted that the cause of action arose in 1963 and the statute was not passed until 1964.)

The court recognizes the possibility that at the time of the injury plaintiff had no cause of action at all in warranty as the Virginia statute which abolished the requirement of privity in all warranty actions, Va.Code Ann. § 8-654.2 (Cum. Supp.1964), was not passed until 1964, whereas the cause of action arose in 1963. The court will overrule defendant's motion to dismiss on this point (failure to state a claim upon which relief may be granted) because it feels that this particular question should be decided at the trial of the case, after the filing of briefs and presentation of evidence, rather than on a pre-trial motion.

As a preliminary matter we must consider the question of whether a Federal District Court may take jurisdiction under the new Virginia statute.

Although there was previously a conflict in the cases on this point (based mainly on the substance-procedure distinction with respect to the Erie doctrine), the answer now is definitely "yes" under the new Federal Rule 4(e) entitled "Service Upon Party Not Inhabitant of or Found Within State." There is no question but that this court can use the Virginia "long-arm" statute to extend its jurisdiction over nonresident defendants.

There has been some confusion in the past as to just what type of action warranty is, as it sounds in contract but has recovery in tort. The problems which this hybrid action might raise with respect to jurisdiction have been eliminated by the draftsman of the "long-arm" statute by the inclusion of a special provision, paragraph (a) (5), supra, for warranty actions.

It seems clear to this court that jurisdiction may be asserted over the defendant in this case under this paragraph of § 8-81.2. It will be noted that it is not necessary for the defendant to be "doing business" in the technical sense to fall within the statute, but only that he be engaged in some persistent course of conduct or derive substantial revenue from goods used in this State.

The Court finds from the testimony and the exhibits attached to the deposition of Mr. Brownstein that defendant Hysan both derived substantial revenue from the sale of its product in Virginia and engaged in a persistent course of conduct by shipping the product directly to purchasers in this State. Although twenty-five thousand dollars might seem a small amount when compared to Hysan's total volume of sales, the court believes that it is substantial enough to satisfy the Virginia "long-arm" statute. Further, it is clear that the defendant was aware that its products were being sold in Virginia and so might reasonably have expected plaintiff to use and be affected by it. The court finds that the facts of this case bring the defendant Hysan within the scope of the Virginia "long-arm" statute.

We turn now to the question of whether this court may constitutionally subject the defendant to in personam jurisdiction under the Virginia statute. There has been a trend of constant expansion of personal jurisdiction over non-resident defendants since the United States Supreme Court's decision in International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), and especially since the further development of the theory of International Shoe in McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957). In conjunction with these two decisions the cases of Hess v. Pawloski, 274 U.S. 352, 47 S.Ct. 632, 71 L.Ed. 1091 (1927), and Henry L. Doherty & Co. v. Goodman, 294 U.S. 623, 55 S.Ct. 553, 79 L.Ed. 1097 (1935) should be noted. Using the criteria set down by the Supreme Court as a starting point, several states have significantly expanded the interpretation of their existing statutes, the trend seeming to be in the direction of pushing state jurisdictional power to the outer limits of due process. See, for example: Shealy v. Challenger Mfg. Co., 304 F.2d 102 (4th Cir. 1962); Green v. Robertshaw-Fulton Controls Co., 204 F. Supp. 117 (S.D.Ind.1962); Johns v. Bay State Abrasive Products Co., 89 F.Supp. 654 (D.Md.1950); Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761 (1961); Nelson v. Miller, 11 Ill.2d 378, 143 N.E.2d 673 (1957); Adamek v. Michigan Door Co., 260 Minn. 54, 108 N.W.2d 607 (1961); Shepard v. Rheem Mfg. Co., 249 N.C. 454, 106 S.E.2d 704 (1959); Smyth v. Twin State Improvement Corp., 116 Vt. 569, 80 A.2d 664, 25 A.L.R.2d 1193 (1951).

This court upholds the constitutionality...