Modern Cycle Sales, Inc. v. Burkhardt-Larsen Co.

• Decision Date: 08 July 1975
• Docket Number: Civ. A. No. 74-C-93.
• Parties: MODERN CYCLE SALES, INC., Plaintiff, v. BURKHARDT-LARSEN COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

395 F. Supp. 587

MODERN CYCLE SALES, INC., Plaintiff, v. BURKHARDT-LARSEN COMPANY, Defendant.

Civ. A. No. 74-C-93.

United States District Court, E. D. Wisconsin.

July 8, 1975.

Matthew H. Quinn, Racine, Wis., for plaintiff.

Thomas W. St. John, Milwaukee, Wis., for defendant.

DECISION AND ORDER

REYNOLDS, Chief Judge.

This action arises out of an alleged breach of an exclusive franchise agreement entered into by Modern Cycle Sales, Inc. (hereinafter "Modern Cycle"), a Wisconsin corporation, and Burkhardt-Larsen Company (hereinafter "Burkhardt-Larsen"), a Minnesota corporation. The agreement, which designated Modern Cycle the exclusive dealer of defendant's snowmobiles in Kenosha County, Wisconsin, was entered into on July 24, 1969. On February 15, 1974, plaintiff, claiming that defendant failed to perform the contract, commenced this action in the Circuit Court of Kenosha County, Wisconsin. Plaintiff served defendant pursuant to § 180.847(4) of the Wisconsin Statutes by personally serving the Secretary of State and mailing a copy of the summons and complaint to the defendant in Minnesota. Thereafter the action was removed to this court on the basis of diversity of citizenship, and no attempt has ever been made to remand the action.

On April 15, 1974, the defendant moved to dismiss the action pursuant to Rule 12(b)(2) and (4) of the Federal Rules of Civil Procedure on the following grounds: (1) lack of personal jurisdiction over defendant Burkhardt-Larsen, and (2) insufficiency of the service of process by mail. Plaintiff served interrogatories concerning defendant's activities within this state, and based on defendant's answers to the interrogatories, plaintiff has moved to quash defendant's motion to dismiss. For the reasons stated herein, defendant's motion to dismiss is denied.

I. Personal Jurisdiction

Defendant contends that it has had insufficient contact with the forum to justify this court's assertion of personal jurisdiction over it pursuant to the Wisconsin long-arm statute, § 262.05, Wis.Stats. (1971). Personal jurisdiction in this action exists by virtue of § 262.05 (1)(d) which provides:

"A court of this state having jurisdiction of the subject matter has jurisdiction over a person served in an action pursuant to s. 262.06 under any of the following circumstances:

"(1) Local presence or status. In any action whether arising within or without this state, against a defendant who when the action is commenced:

* * * * * *

"(d) Is engaged in substantial and not isolated activities within this state, whether such activities are wholly interstate, intrastate, or otherwise." (Emphasis added.)

This subsection contemplates a requirement similar to that of "doing business" within the state which requires not just an isolated transaction but "substantial" activities which are "continuous and systematic." Travelers Ins. Co. v. George McArthur & Sons, 25 Wis.2d 197, 130 N.W.2d 852 (1964); Revision Notes, 30 W.S.A. (1975 pocket part at 32) § 262.05. Consequently, the court must look to the nature of defendant's activities in Wisconsin to determine whether they constitute "substantial and not isolated activities" within the meaning of § 262.05(1)(d). This determination must, of course, be made in the light of due process requirements. Nagel v. Crain Cutter Co., 50 Wis.2d 638, 184 N.W.2d 876 (1971).

Defendant's activities within the State of Wisconsin are set out in its answers to plaintiff's interrogatories. The answers to the interrogatories establish the following:

1. Defendant presently has no resident employees in the State of Wisconsin.

2. For the years 1969, 1970, 1971, 1972, 1973, and continuing until February 8, 1974, defendant employed a number of Wisconsin residents as either salesmen or truck drivers. The salesmen were paid a salary plus a commission, and the truck drivers were paid by the mile.

3. Sales made within the State of Wisconsin by the defendant were as follows:

A. For the year ending December 30 1969 — $4,241,114 B. For the year ending December 30 1970 — $9,385,126 C. For the year ending December 30 1971 — $12,931,577 D. For the year ending December 30, 1972 — $10,137,683; E. For the year ending December 30, 1973 — $4,674,279; and F. From October 1, 1973 to April 30, 1974 — $2,698,707;

and the total sales for the six-year period exceeded $44,000,000.

4. Approximately 45 percent of these sales were made within the State of Wisconsin in 1969, 1970, 1971, 1972, and 1973, while sales in 1974 were accepted in Minnesota.

5. At present, defendant still employs two salesmen, residents of Minnesota, who solicit orders in Wisconsin.

6. From 1969 and continuing to the present, defendant sells and ships merchandise to 253 coded Wisconsin retail dealers in this state.

7. Defendant sells and ships parts and accessories in the State of Wisconsin on special order.

8. Defendant does not own any real or personal property in the State of Wisconsin and has no interest in any Wisconsin corporations.

9. Defendant employed a Wisconsin resident, George Hook, as a salesman in Wisconsin from 1969 to 1974 (Hook was terminated on January 15, 1974, shortly before commencement of this action in February 1974). Hook was the employee of defendant who negotiated the contract with plaintiff.

In addition to the interrogatories, the affidavit of Albert Mengo, president of the plaintiff corporation, and the exclusive franchise agreement itself establish that the franchise agreement was signed by Mr. Mengo for Modern Sales and accepted by George Hook, an employee of the defendant in the State of Wisconsin. Mengo's affidavit also states that the negotiations which led to the signing of the contract took place in Kenosha County, Wisconsin. The affidavit further states that defendant honored the contract for a period of time and delivered snowmobiles to the plaintiff in Wisconsin.

In determining whether a basis for personal jurisdiction exists under § 262.05(1)(d), a court must consider: (1) the quantity of contacts, (2) the nature and quality of the contacts, (3) the source of the cause of action, (4) the interests of the State of Wisconsin, and (5) the convenience of the parties. Zerbel v. H. L. Federman & Co., 48 Wis.2d 54, 179 N.W.2d 872 (1970); Nagel v. Crain Cutter Co., 50 Wis.2d 638, 184 N. W.2d 876 (1971). The court must weigh these various factors, and the essential question becomes the reasonableness of subjecting the particular nonresident defendant to Wisconsin litigation. Nagel v. Crain Cutter Co., supra.

Applying this analysis to the circumstances of this case, this court concludes that defendant Burkhardt-Larsen is "engaged in substantial and not isolated activities" within the State of Wisconsin and is therefore subject to personal jurisdiction. The first factor to be considered is the quantity of contacts. An examination of defendant's answers to the interrogatories reveals numerous contacts with the State of Wisconsin covering a six-year period. The contacts include employment of a number of Wisconsin residents and sales within the state in excess of $44,000,000.

The second factor is the quality and nature of the contacts. Again, a review of the answers to plaintiff's interrogatories reveals that defendant's contacts were systematic and continuous over a six-year period. Over this six-year period, defendant was operating a substantial sales force within the state and selling products to over 253 retail dealers in Wisconsin. In addition, it was defendant who initiated these numerous transactions within this state. The record shows that defendant entered this state and transacted a substantial business. Defendant has established a substantial and continuing relationship with this state, such that it is reasonable to require him to litigate in the Wisconsin courts. From this activity this court concludes that defendant has "purposefully" availed "itself of the privilege of conducting activities * * * in Wisconsin, thus invoking the benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed.2d 1283 (1958).

The third factor to be considered is the source of plaintiff's cause of action. In the present case the exclusive franchise agreement is the source of plaintiff's cause of action. As noted previously, the exclusive franchise agreement was negotiated and accepted in this state by an employee of the defendant, George Hook. Therefore, contrary to defendant's contention, plaintiff's cause of action arises out of and is derived from defendant's activities in the forum. Thus, unlike the situation in Nagel v. Crain Cutter Co., 50 Wis.2d 638, 184 N.W.2d 876 (1971), plaintiff's cause of action is related to defendant's activities in the State of Wisconsin.

The fourth factor to be considered is the interest of the State of Wisconsin. As stated in Zerbel v. H. L. Federman & Co., 48 Wis.2d 54, 66, 179 N.W.2d 872, 878 (1970):

"* * * Wisconsin has a definite interest in providing a forum for its citizens and in some cases this has been given weight. * * *"

Although there is no "special interest" of the state in this action as there was in McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957), where defendant engaged in a course of conduct with residents of this state, the interest of the state becomes a compelling factor although alone, it is insufficient to sustain an exercise of personal jurisdiction. Finally, the convenience of the parties is normally accorded weight only in support of a decision declining the exercise of personal jurisdiction. Even so, an "estimate of the conveniences" favors plaintiff's choice of forums in this case.

Weighing all of these factors, this court believes that defendant is "engaged in substantial and not...