Keller v. Clark Equipment Company

• Decision Date: 21 December 1973
• Docket Number: Civ. No. 4839.
• Citation: 367 F. Supp. 1350
• Parties: Louis J. KELLER and Cyril N. Keller, Plaintiffs, v. CLARK EQUIPMENT COMPANY and Clark Equipment A. G., Defendants.
• Court: U.S. District Court — District of South Dakota

367 F. Supp. 1350

Louis J. KELLER and Cyril N. Keller, Plaintiffs, v. CLARK EQUIPMENT COMPANY and Clark Equipment A. G., Defendants.

Civ. No. 4839.

United States District Court, D. North Dakota, Southeastern Division.

December 21, 1973.

Alan Foss, Van Osdel, Foss & Miller, Fargo, N. D., Malcolm L. Moore and Herman H. Bains, Williamson, Bains & Moore, Minneapolis, Minn., for plaintiffs.

Kermit Edward Bye, Wattam, Vogel, Vogel & Peterson, Fargo, N. D., Thomas D. Allen and Fred E. Schulz, Wildman, Harrold, Allen & Dixon, Chicago, Ill., for defendants.

MEMORANDUM AND ORDER

BENSON, Chief Judge.

Clark Equipment Company and Clark Equipment A.G., the defendants in the above entitled action, have made several motions which will be treated seriatim.

I.

On August 20, 1973, Clark Equipment Company and Clark Equipment A.G. (hereinafter referred to as Clark A.G.), moved this court to stay the above action pending the outcome of a declaratory judgment action entitled Clark Equipment Company v. Louis J. Keller and Cyril N. Keller, filed in the United States District Court for the Western District of Michigan, or alternatively to transfer the above action to the Michigan court for consolidation.

The defendants' motion to stay or transfer has been rendered moot by an order of the Michigan Court dated August 23, 1973. In a well reasoned opinion, Judge Engle determined that the significant contacts rested in North Dakota, whereupon the Michigan case was ordered transferred to the United States District Court for the District of North Dakota, Western Division. Subsequent to the transfer to North Dakota, the Kellers, Plaintiffs here, moved, on September 6, 1973, for a change of venue from the Southwestern Division of North Dakota to the Southeastern Division. This motion was granted on November 6, 1973, and both cases are now venued with this Court.

Also filed on August 20, 1973, was a motion by Defendant Clark A.G. to:

First, sever the claims in all of the counts of the complaint as to Clark A.G. and drop Clark A.G. as a co-defendant;

Secondly, to dismiss the action and/or dismiss the several claims, or alternatively to quash the return of service of summons on the grounds that Clark A.G. is a foreign corporation organized under the laws of Switzerland and is not subject to service within North Dakota and that Clark A.G. has not been properly served in the action;

Finally, the Defendant Clark A.G. moves to dismiss the action and/or such severed claims as against Clark A.G. on the ground that venue is not properly with the District of North Dakota.

In connection with their September 6, 1973, motion for change of venue, the Kellers (Defendants in the declaratory judgment action) moved to consolidate the declaratory judgment action with the instant action. The Defendant Clark Equipment does not oppose consolidation if Clark A.G. were dismissed as a party and the priority of the declaratory judgment action is retained.

The Defendant Clark A.G. argues that it cannot be a proper party because it is a corporation organized under the laws of Switzerland. The plaintiff has premised jurisdiction on the fact that Clark A.G. is a subsidiary of Clark Equipment Company, a Delaware Corporation, which does business in North Dakota. Further, that the issue concerns several manufacturing licenses by and between the plaintiffs, North Dakota residents, and Clark A.G., and were signed by the plaintiffs and J. Becket (sic).

The address given by Clark A.G. for purposes of notice was the office address of Clark Equipment, located in Buchanan, Michigan. Service on Clark A.G. was made pursuant to Federal Rules of Civil Procedure, Rule 4(d)(7), by serving the summons and complaint upon an officer of Clark Equipment at Melroe Division, Gwinner, North Dakota.

With respect to service of process, the Defendant Clark A.G. urges that under the doctrine of Scranton Grain Co. v. Lubbock Machine & Supply Co., 186 N.W.2d 449 (N.D.1971), the North Dakota Long Arm Statute, as amended on August 1, 1971, cannot be retroactively applied to matters occuring prior to August 1, 1971, specifically the licensing agreement between the plaintiffs and Clark A.G. entered into on May 17, 1971.

Section 27-02-09, North Dakota Century Code (N.D.C.C.) provides:

"All statutes relating to pleadings, practice and procedure in civil or criminal actions, remedies, or proceedings, enacted by the legislative assembly, shall have force and effect only as rules of court and shall remain in effect unless and until amended or otherwise altered by rules promulgated by the Supreme Court".

The "long-arm statute", Chapter 28-06.1, N.D.C.C. was adopted by the legislature and became effective on July 1, 1969. In Scranton, the Supreme Court held that Ch. 28-06.1 cannot be applied retroactively because of the requirements of N.D.C.C. § 1-02-10, which provides that no part of the North Dakota Century Code is retroactive unless it is expressly declared to be so.

On June 28, 1971, the Supreme Court of North Dakota, by order, amended the North Dakota Rules of Civil Procedure effective from and after August 1, 1971. Rule 4, as amended, superseded Chapter 28-06.1 and incorporated all provisions of that chapter. Chapter 28-06.1 is no longer a part of the N.D.C.C. Those provisions are now a rule of the North Dakota Supreme Court and thus are not subject to the limitations of N.D.C.C. § 1-02-10. To give the long-arm statute (Rule 4(b)(2)) a retrospective application does not impair or enlarge the substantive rights of the parties. It is the opinion of this Court, in view of the language of the Scranton case, that if the question were again presented to the North Dakota Supreme Court, it would likely follow its holding in Craig v. Herzman, 9 N.D. 140, 81 N.W. 288 (1899), to wit:

"2. Such provision, as it relates to procedure only, may be applied in any case tried after its enactment, although the cause of action arose before the enactment. The rule requiring statutes to be given prospective operation only does not apply to statutes relating to procedure."

II.

The Defendants argue that regardless of whether the long arm statute applies, the Plaintiffs Keller have not shown facts which establish this Court's jurisdiction nor proper service. In this case, Clark A.G., being a wholly foreign subsidiary, has no agents or officers in North Dakota; accordingly, say the Defendants, the service upon the Clark Equipment officer at the Melroe division in North Dakota not only fails because it was service within the state, but also because that officer was not an agent for Clark A.G.

Service upon a foreign corporation or other business entity, pursuant to Rule 4(d)(3) and (e)(7) of the North Dakota Rules of Civil Procedure,¹ is not valid unless there exists an adequate basis for the assertion of in personam jurisdiction over the nonresident.

In recent years, courts have departed from the traditional concepts of jurisdiction over nonresident corporations. While still adhering to the general basis for state jurisdiction over nonresidents, the validity of service on nonresidents has come to be premised on the "traditional notions of fair play and substantial justice". International Shoe Co. v. Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L.Ed. 95 (1945). See generally 2 Moore's Federal Practice Manual § 4.25 1; 4 Moore's § 4.25 1 and 23 ALR 3d 551, 556.

As it has developed, the constitutional test for valid in personam jurisdiction is a realistic, pragmatic test dealing with certain facts. Jurisdiction over a foreign corporation is proper whenever that corporation has certain "minimum contacts". Hamilton National Bank v. Russell, 261 F.Supp. 145 (D. Tenn.1966); Taisho Fire & Marine v. Vessel Montana, 335 F.Supp. 1238 (N. D.Cal.1971).

Whether the requisite `minimum contact' has been achieved may be determined by a three part test enunciated by the Ninth Circuit in L. D. Reeder Contractors v. Higgins Industries, Inc., 265 F.2d 768 (9th Cir. 1969). This test is:

"1. While it is not necessary that the defendant or his agent be within the forum, the nonresident defendant must do some act or consumate some transaction within the forum.

2. The cause of action must arise out of or result from the defendant's activities in the forum.

3. Once the `minimum contacts' have been established by Rule 1 and 2, the jurisdiction based upon such contact must be consonant with the due process tenents of `fair play' and `substantial justice'."

With this as a beginning, the court must decide whether the acts of Clark A.G. in North Dakota were "minimum contacts".

Although the United States...