Kornfuehrer v. Philadelphia Bindery, Inc.

• Decision Date: 04 January 1965
• Docket Number: No. 4-64-Civ. 241.,4-64-Civ. 241.
• Citation: 240 F. Supp. 157
• Parties: Heinz KORNFUEHRER, dba The Clamp Back Organization, Plaintiff, v. PHILADELPHIA BINDERY, INC., Defendant.
• Court: U.S. District Court — District of Minnesota

240 F. Supp. 157

Heinz KORNFUEHRER, dba The Clamp Back Organization, Plaintiff, v. PHILADELPHIA BINDERY, INC., Defendant.

No. 4-64-Civ. 241.

United States District Court D. Minnesota, Fourth Division.

January 4, 1965.

Lawrence Zelle, Roberta K. Levy and Robins, Davis & Lyons, Minneapolis, Minn., for plaintiff.

Franklin D. Gray and Cant, Haverstock, Beardsley, Gray & Plant, Minneapolis, Minn., for defendant.

LARSON, District Judge.

This action is now before the Court on a motion by the defendant to quash the service of process and dismiss the action.

Plaintiff Heinz Kornfuehrer is a resident of Minnesota. The defendant Philadelphia Bindery, Inc., (Bindery), is a Pennsylvania corporation with its principal place of business in Philadelphia.

Early in February, 1963, Kornfuehrer wrote the Bindery to ask if it manufactured spring back binders. A series of letters followed in which the parties discussed specifications and terms. For the purposes of this opinion, it may be assumed that in late March Kornfuehrer placed an order for 7,500 binders and the Bindery accepted it.¹ A few days later the Bindery wrote to Kornfuehrer telling him that it had made an error in its cost estimates and would not be able to produce exactly the type of binder he wanted except at a substantially higher cost. Kornfuehrer replied that he had already made commitments which prevented him from allowing the order to be cancelled and he eventually instituted this suit for breach of contract.

Service of process was made according to the terms of Minn.Stat. § 303.13 Subd. 1(3).² The only questions now before the Court are whether the facts of the transaction allow the One Act statute to be used and, if so, whether its application would violate the constitutional requirement of due process of law.

The first issue is entirely a matter of State law and this Court feels little hesitation about holding that the Minnesota Supreme Court would conclude that the transaction here fell within the terms of the One Act statute. The statute requires only that a portion of the contract is to be performed by either of the parties in Minnesota.

Both parties obviously contemplated that Kornfuehrer would accept the goods and pay for them in Minnesota. This alone brings the case within the scope of the statute.³

The fact that the Bindery was to ship the goods into Minnesota would also satisfy the statutory tests. The shipment was to be f. o. b. Philadelphia and those shipping terms have served as the basis for an argument on the part of the Bindery that no part of the contract was to be performed by it in Minnesota.

Actually the argument seems irrelevant. If the transfer of the binders is not considered a part of the defendant's performance, then it is part of the plaintiff's. Any realistic treatment of the transaction must view the carrier bringing the shipment as the agent of one or both of the parties.⁴ As mentioned earlier, the One Act statute applies when an act of either party is to be performed in Minnesota.

The closer question is whether the Bindery had sufficient "minimum contacts" with Minnesota to permit Minnesota to exercise personal jurisdiction over it. The only contact the Bindery has had with this State is that it entered a contract by mail to sell goods here to a Minnesota resident.

The principal case in this area is McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957). Actually, McGee is clearly controlling unless the fact that an insurance contract was involved is sufficient to distinguish it.⁵ In allowing California to take jurisdiction over a Texas insurance company which had contracted by mail to insure a California resident, the Court said:

"It is sufficient for purposes of due process that the suit was based on a contract which had substantial connection with that State. * * * The contract was delivered in California, the premiums were mailed from there and the insured was a resident of that State when he died. It cannot be denied that California has a manifest interest in providing effective means of redress for its residents when their insurers refuse to pay claims. These residents would be at a severe disadvantage if they were forced to follow the insurance company to a distant State in order to hold it legally accountable. When claims were small or moderate individual claimants frequently could not afford the cost of bringing an action in a foreign forum — thus in effect making the company judgment proof. Often the crucial witnesses — as here on the company's defense of suicide — will be found in the insured's locality. Of course there may be inconvenience to the insurer if it is held amenable to suit in California where it had this contract but certainly nothing which amounts to a denial of due process."⁶ (Citations omitted.)

The legal issues in McGee were so similar to those raised here that a close examination of the factors which the Court thought gave the contract a substantial connection with California seems appropriate. There are only three.⁷

1. The contract was delivered in the forum State. Insofar as this indicates either that (a) one party was a resident of the forum State at the time the contract was formed, or (b) the non-resident party was aware that he was transacting business activities in the forum, this would appear to be an important factor. Otherwise, the fact of spot of delivery would seem minor. Both the elements mentioned are present in this case, although there was no integrated contractual document.

2. Payment was made from the forum State. In this case, the Bindery refused to proceed before any payments were due, so none were ever actually made. Yet the parties obviously contemplated that payment would be made from Minnesota, and this would have equal value insofar as it indicates that Minnesota was in the minds of the parties when entering the business transaction.

3. The plaintiff was a resident of the forum State at the time the contract was breached. That is also true here and would seem quite important. See, however, footnote 1 as to existence of contract.

Joined with this is the problem of whether the State's interest in providing a forum for suits against foreign insurance companies is greater than its interest in other contract actions. The Supreme Court does not appear to rely heavily on any such factor in McGee and this Court does not see any substantial difference.⁸ The real thrust of McGee is that changing patterns of business activity have made an extension of the power of a State to exercise personal jurisdiction both necessary and reasonable. The Court pointed out that:

"Looking back over this long history of litigation a trend is clearly discernible toward expanding the permissible scope of state jurisdiction over foreign corporations and other nonresidents. In part this is attributable to the fundamental transformation of our national economy over the years. Today many commercial transactions touch two or more States and may involve parties separated by the full continent. With this increasing nationalization of commerce has come a great increase in the amount of business conducted by mail across state lines. At the same time modern transportation and communication have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity."⁹

The opinion in McGee also points out that witnesses are as likely to be in one State as another. While this does not actually go toward establishing minimum contacts,¹⁰ it does emphasize how appropriate a relaxation of earlier rules governing jurisdiction is. In this case the major witnesses (aside from Kornfuehrer and the president of the Bindery) will be people from the Minnesota area testifying on the issue of damages.

Thus, this Court has concluded that the fact that the Bindery had entered a contract with a Minnesota resident to supply the resident with its product in the normal course of its profit-making activities was sufficient contact with Minnesota to allow the State to exercise personal jurisdiction for causes of action arising out of the contract.¹¹ There are many cases which can be viewed as forerunners of this one.¹² It is true that this result creates inconvenience to the Bindery, but as one Court has noted:

"Whenever litigation arises out of business transactions conducted across state lines between parties whose principal places of business are in different states, there may be hardship to the party required to litigate away from home. There is no constitutional requirement, however, that this hardship must invaribly be borne by the plaintiff whenever the defendant is not deemed present in the state of plaintiff's residence. In some circumstances there is adequate basis for jurisdiction when the defendant has elected to deal with the plaintiff even though only by mail. * * * Again, there is jurisdiction when the cause of action arose out of the breach of a contract made and to be performed in the state * * *."¹³ (Citations omitted.)

Based on this reasoning, the motions of the defendant to quash the service of process and dismiss the action must be denied.

1 There is a question as to just which documents form the contract and I do not mean to indicate any final decision on the issue by this characterization. All that is material here is that both parties thought they had reached agreement on an order. That much plainly appears from their letters.

The plaintiff's burden of proof as to the existence of a contract is met by the letters attached to the pleadings. Cf. Williams v. Connolly, 227 F.Supp. 539, 548-549 (D.Minn.1964).

The case has not developed enough to know whether one of the defenses will be that there was no contract because of a failure to agree on an essential term. Nothing in the affidavit or pleadings before me indicates that this is impossible, and I do not mean to express any opinion on the point.

2 Minn.Stat. §...