National Can Corp. v. K Beverage Co.
| Decision Date | 02 April 1982 |
| Docket Number | Nos. 80-3112,80-3173,s. 80-3112 |
| Citation | 674 F.2d 1134 |
| Parties | NATIONAL CAN CORPORATION, Plaintiff-Appellant, Plaintiff-Appellee, v. K BEVERAGE COMPANY, Defendant, Barbara Lundervold, Hayden Thompson and Joanne Thompson, Defendants-Appellees, Allen Lundervold and Warren Anderson, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Russell H. Saunders, Malcolm Friedman, Kenneth S. Handmaker, Handmaker, Weber & Meyer, Louisville, Ky., for plaintiff-appellant.
W. Waverly Townes, Nold, Mosley, Clare, Hubbard & Rogers, Louisville, Ky., for defendants-appellees.
Before EDWARDS, Chief Circuit Judge, ENGEL, Circuit Judge, and PECK, Senior Circuit Judge.
This case presents an interesting set of facts concerning the constitutional reach of a state long-arm statute. At issue is whether or not all of the facts and circumstances of this case, beginning with the execution of personal guaranties by the five defendants, give Kentucky in personam jurisdiction over all of these nonresident guarantors.
Plaintiff National Can, a Delaware corporation with its principal place of business in Illinois, contracted to sell glass bottles to defendant K Beverage Company (henceforth KBC), a Colorado corporation with its principal place of business in Louisville, Kentucky. KBC was a franchisee of Pop Shoppes of America, and its business was the sale of multi-flavored soft drinks.
There are five individual defendants who are the principal parties in this appeal: Allen and Barbara Lundervold, Hayden and Joanne Thompson, and Warren Anderson. The Thompsons and Anderson are residents of North Dakota; the Lundervolds are residents of Minnesota. Anderson, Hayden Thompson, and Allen Lundervold were the shareholders of KBC. 1 The two wives were not shareholders in name but are said to have a propriety interest in KBC through the marital property laws.
Before shipping any bottles to KBC in Louisville, National Can demanded and received the personal guaranties of all five individual defendants, refusing to rely on KBC's credit alone. The guaranty contracts were executed in North Dakota and mailed to plaintiff in Illinois.
Soft drink sales in Kentucky fizzled. KBC failed to pay for the bottles supplied by National Can, and National Can sued KBC on the contract and the individuals on their guaranties. The question in this case is whether or not the federal district court sitting in Kentucky had in personam jurisdiction over the five individual defendants. The lower court decided this issue by dismissing the claims against Joanne and Hayden Thompson and Barbara Lundervold for want of jurisdiction. He entered summary judgment in favor of National Can against KBC, Warren Anderson and Allan Lundervold. Plaintiff appeals the dismissal of its action against the Thompsons and Barbara Lundervold, and the two individual defendants appeal from the judgment entered against them. Defendant KBC has not appealed.
It is clear that in a diversity case the personal jurisdiction of a federal district court is governed by the long-arm statute of the state in which it sits. The federal court must decide first, whether the statute authorizes jurisdiction over the nonresidents, and second, whether this jurisdictional reach is constitutional. Where the state has permitted its courts to reach to the constitutional limits in pursuing nonresident defendants, the two questions become one. Poyner v. Erma Werke GMBH, 618 F.2d 1186, 1188 (6th Cir.), cert. denied, Insurance Co. of North America v. Poyner, 449 U.S. 841, 101 S.Ct. 121, 66 L.Ed.2d 49 (1980).
Kentucky Revised Statute § 454.210(2)(a), under which jurisdiction is asserted, provides: This Court has held this statute purports to extend its reach to the limits of the federal due process clause. Davis H. Elliot Co., Inc. v. Caribbean Utilities Co., LTD, 513 F.2d 1176, 1179-81 (6th Cir. 1975). See also Tube Turns Div. of Chemtron v. Patterson Co., 562 S.W.2d 99 (Ky.App.1978). Therefore, the only question for this court to decide is whether or not exercise of personal jurisdiction over these defendants is constitutionally permissible.
The Supreme Court recently reaffirmed its test for a constitutional assertion of in personam jurisdiction. Citing to its decision in International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945), the Court stated, "a state court may exercise personal jurisdiction over a nonresident defendant only so long as there exist 'minimum contacts' between the defendant and the forum State." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291, 100 S.Ct. 559, 564, 62 L.Ed.2d 490 (1980). Those contacts must be substantial enough to ensure that the exercise of jurisdiction "does not offend traditional notions of fair play and substantial justice." International Shoe, supra, 326 U.S. at 316, 66 S.Ct. at 158, quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 342, 85 L.Ed. 278 (1940).
With respect to the appeal of Allen Lundervold and Warren Anderson, it is not difficult to find the requisite minimum contacts with Kentucky existed. Lundervold served as general manager and secretary-treasurer of KBC and in that capacity moved to Louisville and operated the company. He and his wife Barbara bought a home in Kentucky, in which they both lived for about one year. Warren Anderson was president of KBC and visited Louisville about once a month to oversee the company's business. As president he executed in Kentucky a lengthy finance statement and security agreement with a Louisville bank. The activities of these defendants as officers and shareholders of KBC, which are in addition to the signing of personal guaranties, are more than sufficient to occasion the dismissal of the two defendants' appeals.
National Can was also entitled to prevail in its suit against the other three defendants, whom the District Judge dismissed on motion. Hayden Thompson was a shareholder of KBC and served as its vice-president. He, along with Warren Anderson and Allen Lundervold, was assigned a security interest in the Kentucky assets of KBC, which included the soft drink bottles supplied by National Can. This security interest was filed in Jefferson County, Kentucky.
For Barbara Lundervold and Joanne Thompson, the contacts are more limited. Barbara, together with her husband, purchased a home in Kentucky and moved to the state for a year in connection with Allen's duties as shareholder and manager of KBC. There is no showing, however, that Barbara performed any activities in relation to the company or to this lawsuit during her year in the Commonwealth. As for guarantor Joanne Thompson, this is a naked minimum contacts case. It is undisputed that Joanne never set foot in Kentucky. Her only relationship to the state is the signing of the guaranty agreement and her marital interest in the KBC shares. Although neither Barbara nor Joanne was a shareholder of record, the marital property laws of all states connected with this transaction 2 give a wife a right to share in property acquired by her husband during the marriage. All parties must have recognized the existence of this property interest in that Barbara's and Joanne's signatures on the guaranties were demanded and received. In signing, Barbara and Joanne risked their names and financial worth to aid in the establishment of a Kentucky venture in which they had a property interest. The fact that they were not named shareholders does not negate a proprietary concern in the success of KBC. It is our opinion that the guaranties, when signed by a person with an economic interest in the corporation, furnished the necessary minimum contacts. We find Kentucky had jurisdiction over all five individual defendants.
In Southern Machine Co. v. Mohasco Industries, Inc., 401 F.2d 374, 381 (6th Cir. 1968)...
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