Johnston v. Time, Inc.

• Decision Date: 23 November 1970
• Docket Number: No. C-49-WS-69.,C-49-WS-69.
• Citation: 321 F. Supp. 837
• Court: U.S. District Court — Middle District of North Carolina
• Parties: Neil JOHNSTON, Plaintiff, v. TIME, INC., Arnold Red Auerbach and George Plimpton, Defendants.

321 F. Supp. 837

Neil JOHNSTON, Plaintiff, v. TIME, INC., Arnold Red Auerbach and George Plimpton, Defendants.

No. C-49-WS-69.

United States District Court, M. D. North Carolina, Winston-Salem Division.

January 28, 1970.

On Motions for Summary Judgment November 23, 1970.

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Weston P. Hatfield and Roy G. Hall, Jr., of Hatfield, Allman & Hall, Winston-Salem, N. C., for plaintiff.

Egbert L. Haywood, of Haywood, Denny & Miller, Durham, N. C., and Harold R. Medina, Jr., of Cravath, Swaine & Moore, New York City, for defendants.

MEMORANDUM AND ORDER

GORDON, District Judge.

This is an action for libel brought against Time, Inc., Arnold "Red" Auerbach and George Plimpton, to recover damages allegedly resulting from an article in the December 23, 1968, issue of Sports Illustrated. A motion has been made by defendant, Time, Inc., a Delaware corporation, to dismiss the action for lack of jurisdiction over the person under Rule 12(b) (2) of the Federal Rules of Civil Procedure. Defendant, Time, Inc., was served with process under the provisions of North Carolina General Statute §§ 55-145 and 55-146 which allowed substituted service upon the Secretary of State of North Carolina. The pertinent part of G.S. § 55-145 reads as follows:

"(a) Every foreign corporation shall be subject to suit in this State, by a resident of this State or by a person having a usual place of business in this State, whether or not such foreign corporation is transacting or has transacted business in this State and whether or not it is engaged exclusively in interstate or foreign commerce, on any cause of action arising as follows:

* * * * * *

"(2) Out of any business solicited in this State by mail or otherwise if the corporation has repeatedly so solicited business, whether the orders or offers relating thereto were accepted within or without the State; or

"(3) Out of the production, manufacture, or distribution of goods by such corporation with the reasonable expectation that those goods are to be used or consumed in this State and are so used or consumed, regardless of how or where the goods were produced, manufactured, marketed, or sold or whether or not through the medium of independent contractors or dealers; or

"(4) Out of tortious conduct in this State, whether arising out of repeated activity or single acts, and whether arising out of misfeasance or nonfeasance."

The Court will use the method of analysis adopted by the Fourth Circuit in Bowman v. Curt G. Joa, Inc., 4 Cir., 361 F.2d 706 (1966) to determine the jurisdictional problem. Service was made in accordance with Rule 4(d) (7), Federal Rules of Civil Procedure, which provides that service on a foreign corporation may be made in a manner prescribed by state law. Therefore, according to Bowman, the matter should be viewed in two contexts: The first is a question of state law, i. e., whether the state has made provisions for obtaining jurisdiction of the foreign corporation in its own courts under the facts as they are presented by the matter being adjudicated. In this context, state decisions are binding on the district court. Secondly, if the State has purported to exercise jurisdiction, then the question of due process under the Fourteenth Amendment may arise. This being a federal question, state decisions are not controlling.

STATE LAW

Defendant, Time, Inc., cites as a leading authority for its motion for dismissal, the North Carolina case of Putnam v. Triangle Publications, Inc., 245 N.C. 432, 96 S.E.2d 445 (1957). In that case a North Carolina resident sought to bring a libel action against the defendant, a Delaware Corporation, based on an alleged libel contained in Official Detective Stories magazine. A judgment was entered quashing the attempted service of summons and complaint upon the defendant and the plaintiff appealed. The North Carolina Supreme Court held that attempted service under G.S. § 55-38.1 (now G.S. § 55-145) was not proper because of the lack of minimum contacts with the State. The court dealt primarily with the present G.S. § 55-145(a) (3) and stated:

"It would seem that the language of G.S. § 55-38.1(a), subsection (3), is broad and comprehensive enough to sustain the attempted service of process in this case, provided this section is constitutional as applied to the facts of this case." 96 S.E.2d at 453.

With reference to G.S. § 55-145(a) (4), the subsection upon which the plaintiff in this case bases his service, it was stated in Putnam that:

"In the instant case the defendant was not in the State of North Carolina, and had no minimum contacts with the State. To hold that G.S. § 55-38.1(a), subsection (4), applied to the facts of this case, would raise a serious question as to its constitutionality." 96 S.E.2d at 455.

Thus it appears that the North Carolina Supreme Court was concerned primarily in Putnam with the question of due process, and not with the question of whether the state statute did in fact encompass the fact situation before the court. There are marked dissimilarities between the fact situation presented to the North Carolina Supreme Court in Putnam, and the fact situation involved in the present case.

(1) Triangle publications had "some" North Carolina resident subscribers to "some" of its magazines. Time, Inc., had 28,200 North Carolina subscribers to Sports Illustrated on December 23, 1968, the date of the issue containing the allegedly libelous article, and on March 13, 1969 (five days before service was made on the North Carolina Secretary of State) Time, Inc., had 50,500 North Carolina subscribers to Time magazine, 117,862 subscribers to Life magazine, and 6,247 North Carolina subscribers to Fortune magazine.

(2) Triangle publications solicited subscriptions in the State of North Carolina only by mail and by coupons attached to their magazines. Time, Inc., also carried out subscription solicitations in this manner; but additionally subscriptions were solicited on behalf of Time, Inc. by four independent college bureau representatives in North Carolina, seventy-two college bookstores in North Carolina, three or four non-college bookstores in North Carolina, independent agents who solicited through the schools in North Carolina, various sales corporations, some based inside and some outside the State of North Carolina, and newsboys in North Carolina.

(3) Triangle publications had "virtually no advertising from North Carolina. In 1968, Time, Inc. sold advertising space in its publications to twenty or more advertisers which reside or have their principal place of business in North Carolina. Sixty-six or more pages of advertising space were sold to these advertisers.

(4) Triangle publications did not solicit advertising within North Carolina. Time, Inc. occasionally had a manager or salesman from its New York, Georgia, or Florida office visit North Carolina for interviews with corporations which were considered to be possible advertisers.

(5) Triangle publications owned no property nor had control of any property within the State of North Carolina. Time, Inc. has a wholly-owned subsidiary, Eastex, Inc., whose products include paper and paperboard. Eastex, Inc. has a plant in Charlotte, North Carolina. Although a corporation cannot be doing business in a state through the presence of a subsidiary, this fact does merit some consideration in portraying the whole scope of the problem.

(6) Triangle publications, in its operation of Official Detective, used only free lance writers. Time, Inc., employs a large staff of writers, and George Plimpton, the author of the article containing the alleged libel, was on contract with Sports Illustrated.

(7) Triangle publications, in its distribution of Official Detective, used common carriers who were independent contractors, to deliver a large majority of the copies of the magazine. Time, Inc., whose magazine sales are carried out largely by subscription (94%), makes great use of the United States mails for delivery directly to the subscriber.

Bearing on the issue of whether North Carolina General Statute 55-145 would be applicable to the present fact situation, insofar as state interpretation is concerned, is the case of Painter v. Home Finance Co., 245 N.C. 576, 96 S. E.2d 731 (1957), which was decided twenty-six days after Putnam was handed down. The defendant was a South Carolina corporation which had allegedly wrongfully repossessed an automobile in North Carolina. The plaintiff brought this action in North Carolina and procured service under what is now G.S. § 55-145(a) (4) which deals with a tortious act committed in this state. Defendant's motion to quash service of process was denied and defendant appealed. The North Carolina Supreme Court affirmed stating that the mere fact that a tortious act was committed within the state by the defendant was sufficient under the statute to render the defendant amenable to the jurisdiction of the North Carolina courts. The opinion further stated that a finding that the defendant was "doing business" within the state was mere surplusage and not necessary for the purposes of the determination. In essence, the North Carolina Supreme Court held that the commission of a single tort was sufficient under the statute to grant jurisdiction.

A case helpful in making a ruling as to whether a tort was indeed committed in this state is Sizemore v. Maroney, 263 N.C. 14, 138 S.E.2d 803 (1964) which held:

"Unless otherwise provided by statute, libelous matter sent through the mails is generally actionable either at the place of posting or at the place of receipt by the addressee, even in another state, because libel actions are transitory in their nature. The rationale of the rule is that each time a libelous matter is brought to the attention of a third party a new publication has occurred, and that each publication is a separate tort. 53 C.J.S. Libel and Slander § 158; 33 Am.Jur., Libel and Slander, §

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