McQuay, Inc. v. Samuel Schlosberg, Inc.

• Citation: 321 F. Supp. 902
• Decision Date: 19 January 1971
• Docket Number: No. 4-70 Civ. 327.,4-70 Civ. 327.
• Parties: McQUAY, INC., Plaintiff, v. SAMUEL SCHLOSBERG, INC., Defendant.
• Court: U.S. District Court — District of Minnesota

321 F. Supp. 902

McQUAY, INC., Plaintiff, v. SAMUEL SCHLOSBERG, INC., Defendant.

No. 4-70 Civ. 327.

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

January 19, 1971.

Dorsey, Marquart, Windhorst, West & Halladay, by John D. Levine, and Joseph Edward Olson, Minneapolis, Minn., for plaintiff.

Robins, Davis & Lyons, by Gary H. Levinson, Minneapolis, Minn., for defendant.

NEVILLE, District Judge.

Plaintiff, a Minnesota based manufacturing corporation, in bringing this diversity action has attempted to effect service of process upon the defendant, a New York corporation, under the Minnesota long-arm statutes, Minn.Stat. §§ 303.13 Subd. 1(3) and 543.19 Subd. 1. Defendant is a heating and air conditioning contractor with its principal and only office and place of business in New York City. It is one of plaintiff's customers. The only connection it has or has had with the State of Minnesota is that it submitted a purchase order to plaintiff to buy some of its Minnesota manufactured air conditioning equipment. Defendant has no office nor agent in Minnesota, has no license to do business in Minnesota and has no telephone, address, agents or representatives in Minnesota. Defendant has never come into Minnesota to solicit any business. Rather in the instance involved in the case at bar as on previous occasions an agent for plaintiff, operating within the State of New York solicited defendant to make a purchase of plaintiff's product or goods. The purchase contract was negotiated and executed in New York. Delivery of the equipment subsequently was made in New York. The purchase price was payable in Minnesota.

Defendant claims the equipment sold was defective and that plaintiff has breached its contract and warranties. It has thus refused to pay some $90,000 of the purchase price for the recovery of which this suit is brought. The equipment was used in three different installations, two in the State of New York and one in New Jersey.

The only portion of the contract performable in Minnesota is the payment of the purchase price. Plaintiff does point out, however, that the parties had substantial negotiations prior to commencement of this suit in an effort to adjust their differences and this involved correspondence with and telephone calls to and from plaintiff and its counsel in Minnesota. Further, plaintiff and defendant have had business relationships with each other over a period of many years prior to the present contract in dispute.

Plaintiff takes the view that defendant's purchase order engendered substantial activity in Minnesota, caused plaintiff to manufacture equipment costing some $147,865.13 and constituted sufficient activity within, and minimal contracts with, the State of Minnesota to constitute "doing business" in Minnesota within the meaning of Minn.Stat. § 303.13 Subd. 1(3) which provides:

"(3) If a foreign corporation makes a contract with a resident of Minnesota to be performed in whole or in part by either party in Minnesota, or if such foreign corporation commits a tort in whole or in part in Minnesota against a resident of Minnesota, such acts shall be deemed to be doing business in Minnesota by the foreign corporation and shall be deemed equivalent to the appointment by the foreign corporation of the secretary of the state of Minnesota and his successors to be its true and lawful attorney upon whom may be served all lawful process in any actions or proceedings against the foreign corporation arising from or growing out of such contract or tort. Such process shall be served in duplicate upon the secretary of state * * *. The making of the contract or the committing of the tort shall be deemed to be the agreement of the foreign corporation that any process against it which is so served upon the secretary of state shall be of the same legal force and effect as if served personally within the state of Minnesota."

It is clear that the contract literally is "to be performed in whole or in part by either party * * * in Minnesota"; that plaintiff is a resident of Minnesota; that the purchase price was to be paid to plaintiff in Minnesota; and that the goods were to be manufactured in Minnesota. Plaintiff claims the combination of engendering activity within Minnesota by submitting a purchase order, the contract provision for payment of the purchase price in Minnesota, the long-distance contracts with plaintiff and with Minnesota counsel in attempting to adjust the present dispute and the fact of past dealings between the parties over many years, taken together, are sufficient contact with and activities within the State of Minnesota to permit the service of process which it made on the Minnesota Secretary of State under this long-arm statute.

Alternatively plaintiff claims the most recently enacted (1969) Minnesota long-arm statute § 543.19 Subd. 1 applies. This provision as follows:

"As to a cause of action arising from any acts enumerated in this subdivision, a court of this state with jurisdiction of the subject matter may exercise personal jurisdiction over any foreign corporation or any non-resident individual, or his personal representative, in the same manner as if it were a domestic corporation or he were a resident of this state. This section applies if, in person or through an agent, the foreign corporation or non-resident individual:

* * * * * *

(b) Transacts any business within the state,

* * * * * *

Subd. 2. The service of process * * * may be made by personally serving the summons upon the defendant outside of this state with the same effect as though the summons had been personally served within this state."

Plaintiff contends, for all of the reasons above recited, that this statute also permits personal service on defendant outside the state. Accordingly plaintiff effected such personal service on defendant through the United States Marshal in New York.

As to both statutes plaintiff claims after pointing out that read literally by their terms they apply in this case:

(1) The courts of the State of Minnesota would uphold service of process in the manner here made and

(2) The securing of in personam jurisdiction in this case is consistent with and not violative of federal due process.

Any plaintiff, when challenged, has the burden to prove that it has obtained in personam jurisdiction. Williams v. Connolly, 227 F.Supp. 539, 550 (D.Minn.1964). A prima facie showing on a pretrial motion is sufficient however. Kornfuehrer v. Philadelphia Bindery, Inc., 240 F.Supp. 157, 158 (D.Minn. 1965); United Barge Co. v. Logan Charter Service, Inc., 237 F.Supp. 624, 631 (D.Minn.1964). The leading case in the Eighth Circuit is Aftanase v. Economy Baler Co., 343 F.2d 187 (8th Cir. 1965), in which the Court of Appeals analyzed the various Minnesota cases and reiterated the requirements of International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), that valid exercise of jurisdiction requires that non-resident defendants have "certain minimum contacts * * * such that the maintenance of the suit does not offend "traditional notions of fair play and substantial justice". Aftanase recognized that more recent federal cases have "greatly relaxed the due process limitations on personal jurisdiction". It was there acknowledged that a state may impose stricter limitations than those proscribed by the bounds of due process and a federal court should observe these further limitations where a diversity case is instituted in a United States District Court or is one removed from a State court.

The Minnesota Supreme Court has indicated that it will assert maximum jurisdiction consistent with the limitations imposed by due process. This court interprets the Minnesota Supreme Court holdings to mean that the outer limits of due process are co-extensive and equate with the limits of permissive service of process on foreign corporations under long arm statutes. In McNeely v. Clayton & Lambert Mfg. Co., 292 F.Supp. 232, 236 (D.Minn. 1968), this court observed that Minnesota will assert maximum jurisdiction permissible, citing a number of Minnesota cases including Dahlberg Co. v. Western Hearing Aid Center Ltd., 259 Minn. 330, 107 N.W.2d 381, cert. denied 366 U.S. 961, 81 S.Ct. 1921, 6 L.Ed.2d 1253 (1961). See the subsequent case of Hunt v. Nevada State Bank, 285 Minn. 77, 172 N.W.2d 292 (1969), cert. denied Burke v. Hunt, 397 U.S. 1010, 90 S.Ct. 1239, 25 L.Ed.2d 423 (1970).

Since the reaches of due process are co-extensive with in personam jurisdiction allowed by the Minnesota Supreme Court, in reality it becomes immaterial to determine what action the Minnesota Supreme Court would take in this case since the Minnesota Supreme Court could not exceed limitations of due process and would not be more restrictive. The Minnesota Supreme Court in frequent utterances has however required "at least minimal" contacts with Minnesota. This court doubts whether the Minnesota Supreme Court would sustain jurisdiction in this instance despite certain broad language in the most recent cases of Hunt v. Nevada State Bank, supra, and Wuertz v. Garvey, 287 Minn. 353, 178 N.W.2d 630, 631 (1970), both sustaining jurisdiction under the long-arm statutes. The prior cases of Fourth Northwestern Nat. Bank v. Hilson Industries Inc., 264 Minn. 110, 117 N.W.2d 732 (1962), and Marshall Egg Transport Co. v. Bender-Goodman Co. Inc., 275 Minn. 534, 148 N.W.2d 161 (1967), particularly the former, are persuasive. The Hilson Industries case was a suit to recover on promissory notes which grew out of a transaction whereby a Minnesota manufacturer of automatic ice vending machines sold 50 coolers to a foreign corporation in Ohio. After a dispute and a trip to Ohio by a representative of the Minnesota manufacturer, certain stipulations were then arrived at, including the execution of three promissory notes. The notes were payable in Minnesota and were then subsequently assigned to the Fourth Northwestern...