O'NEAL v. Huxley Development Corp.

• Decision Date: 22 February 1983
• Docket Number: Civ. A. No. 82-79.
• Parties: Robert P. O'NEAL, Plaintiff, v. HUXLEY DEVELOPMENT CORPORATION, Defendant and Third-Party Plaintiff, v. OY PARTEK, AB, t/a Paraisten Kalkki Oy, et al., Third-Party Defendants.
• Court: U.S. District Court — District of Delaware

558 F. Supp. 462

Robert P. O'NEAL, Plaintiff, v. HUXLEY DEVELOPMENT CORPORATION, Defendant and Third-Party Plaintiff, v. OY PARTEK, AB, t/a Paraisten Kalkki Oy, et al., Third-Party Defendants.

Civ. A. No. 82-79.

United States District Court, D. Delaware.

February 22, 1983.

Robert Jacobs and Thomas C. Crumplar, Jacobs, Crumplar & Donovan, Wilmington, Del., for plaintiff.

Walter L. Pepperman, II, Morris, Nichols, Arsht & Tunnell, Wilmington, Del., for Huxley Development Corp.

Richard P.S. Hannum, Prickett, Jones, Elliott, Kristol & Schnee, Wilmington, Del., for Gale Corp. and Keene Corp.

Warren Burt, Wilmington, Del., for Oy Partek.

B. Wilson Redfearn, Tybout, Redfearn, Casarino & Pell, Wilmington, Del., for Special Materials, Inc., York Industries, and Special Electric Co.

Philip B. Beardsley, H. Murray Sawyer, Jr., P.A., James Semple, Flanzer & Isaacs, Wilmington, Del., for Pacor, Inc. and Herty Foundation (Mr. Semple for Herty Foundation only).

Mary Pat Trostle, Biggs & Battaglia, Wilmington, Del., for Hercules, Inc. and Haveg Industries, Inc.

James F. Kipp, Trzuskowski, Kipp, Kelleher & Pearce, P.A., Wilmington, Del., for Asbestos Corp. of America, Inc.

George B. Heckler, Jr., Heckler & Cattie, Wilmington, Del., for Continental Products and Associated Mineral Corp., A.G.

Douglas B. Catts, Schmittinger & Rodriguez, P.A., Dover, Del., for Celotex Corp.

John C. Phillips, Jr., Wilmington, Del., for Powhatan Min. Corp. and Mead Paper Specialty.

J.R. Julian, Wilmington, Del., for GAF Corp.

Michael N. Castle, Michael N. Castle, P.A., Wilmington, Del., for Johns-Manville.

James T. McKinstry, Richards, Layton & Finger, Wilmington, Del., for Owens-Corning Fiberglas Corp.

Stuart B. Young, Young, Conaway, Stargatt & Taylor, Wilmington, Del., for Hollingsworth and Vose Paper Co.

OPINION

MURRAY M. SCHWARTZ, District Judge.

Third-party defendant Special Electric Co., Inc. ("Special Electric") has filed a motion to dismiss the third-party complaint of defendant, Huxley Development Corporation ("Huxley")¹ on the grounds of lack of personal jurisdiction and insufficiency of service of process.² The motion to dismiss for lack of personal jurisdiction will be granted in that the Delaware Long Arm Statute, 10 Del.C. § 3104(c), provides no basis for the assertion of personal jurisdiction.³

The record reveals the following facts. Richard Wareham is a majority shareholder and chief executive officer of three companies: Special Electric; Special Materials (Wisconsin), Inc. ("Special Materials"); and Special Materials (Delaware), Inc. (hereinafter collectively referred to as the "Special companies"). The three Special companies operated out of the same corporate headquarters in Madison, Wisconsin, used the same logo (but not the same name) and shared an "800" telephone number. Only Special Electric is involved in the instant motion.⁴ Special Electric's business was primarily the sale of electrical insulation materials while the other two companies are apparently engaged in the business of selling asbestos fibers and asbestos paper. It is undisputed that Special Electric is not qualified to do business in Delaware, has no license, franchise or personnel in Delaware, neither owns nor leases property in Delaware, and has no office, telephone, bank or brokerage account in Delaware.⁵

The only direct link between Special Electric and the subject matter of this litigation involves incidents in 1972 and 1977. In 1972, Haveg sent Purchase Order No. 55965 to Special Electric for 8,000 pounds of high bulk asbestos paper. (Doc. 216, Ex. A). The order states that the order was confirmed on July 10, 1972, the same day it was written. Records of Haveg indicate that it received 508 pounds of asbestos paper in 1972 in satisfaction of Purchase Order No. 55965. (Doc. 216, Ex. A). There is no direct evidence that Special Electric actually filled the order. In an affidavit, Richard Wareham, treasurer and chief executive officer of Special Electric, stated that Special Electric "entered into no contracts in Delaware" and has "made no sales to any companies in Delaware." (Doc. 149, Ex. A).

With respect to the sale in 1977, Haveg Purchase Order No. 73193 states that Haveg ordered 5,000 pounds of high bulk asbestos paper from Special Electric. (Doc. 216, Ex. B). The order states that it was confirmed on November 11, 1977, the same day it was written. Haveg records also indicate receipt of 156 pounds of asbestos paper in satisfaction of Purchase Order No. 73193. (Doc. 216, Ex. B). Haveg documents do not indicate that Special Electric filled the purchase order. An invoice of Special Materials indicates that Special Materials and not Special Electric filled Haveg's Purchase Order No. 73193. (Doc. 216, Ex. B — Invoice No. 503). The invoice states that Special Materials sent the paper and billed Haveg. Again, Special Electric denies having filled the 1977 order.⁶

Whether this Court has personal jurisdiction over Special Electric depends on whether the Delaware Long Arm Statute, 10 Del.C. § 3104(c), reaches the complained of conduct. Third-party plaintiff, Huxley, has the burden of establishing by a preponderance of the evidence that personal jurisdiction over Special Electric is proper. See Forsythe v. Overmyer, 576 F.2d 779, 781 (9th Cir.), cert. denied, 439 U.S. 864, 99 S.Ct. 188, 58 L.Ed.2d 174 (1978); Simpson v. Thiele, Inc., 344 F.Supp. 7, 8 (D.Del.1972).

Huxley urges two bases in support of personal jurisdiction over Special Electric. One is premised upon the two alleged sales of asbestos products to Haveg, one in 1972 and the other in 1977. The other is premised upon the fact that the three Special companies conducted business as a triumvirate rather than clearly defined corporate entities and therefore should be liable for the acts of each other. Huxley argues that the sales in 1972 and 1977 satisfy subsections (1), (2), (3) and (4) of 10 Del.C. 3104(c).⁷

Huxley claims that subsections (c)(1) and (c)(2) support jurisdiction in that Special Electric transacted business in Delaware and contracted to ship asbestos paper into Delaware in 1972 and again in 1977. Huxley's allegations would be correct if the evidence established that Special Electric, upon receipt of Haveg's purchase orders, simply filled these orders, shipped the asbestos into Delaware and then billed Haveg. However, the record only establishes that Haveg sent two purchase orders to Special Electric. Both orders indicate that Haveg confirmed the orders on the same day that the purchase orders were written. However, the record does not indicate which Special company, if any, filled the orders.⁸ Wareham, an officer of Special Electric, denies that Special Electric ever transacted business in Delaware or contracted to supply goods in Delaware. Special Electric claims that if Special Electric was involved at all, upon receipt of Haveg's purchase orders it simply referred the order to an affiliate corporation, Special Materials, a corporation that sold high bulk asbestos paper. In support of its position, Special Electric offers an invoice of Special Materials indicating that Special Materials filled the Haveg order. Although there is no similar invoice for the 1972 sale, Special Electric argues that what occurred in 1977 also occurred in 1972.

The Court finds that the evidence does not support Huxley's claim that Special Electric actually filled Haveg's 1972 or 1977 purchase orders. At best, the evidence indicates that Special Electric simply referred the purchase orders to Special Materials rather than fill the orders itself. At best, with respect to the two orders, the record indicates that Haveg erroneously designated Special Electric to fill the purchase orders for asbestos paper. Haveg did not differentiate between the companies and the Special companies did not make clear to Haveg which company would be filling the orders.

The question remains, however, whether Special Electric's referral of Haveg's purchase order to Special Materials subjects Special Electric to jurisdiction under section 3104(c). The issue is whether a referral of a purchase order to an affiliate corporation constitutes a transaction in Delaware under section 3104(c)(1) or contracting to supply goods in Delaware under section 3104(c)(2).

In Wilmington Supply Co. v. Worth Plumbing & Heating, Inc., 505 F.Supp. 777, 779-80 (D.Del.1980), the court stated that Delaware follows the courts of Illinois in interpreting the Delaware Long Arm Statute, 10 Del.C. § 3104(c), which is based upon the Illinois Long Arm Statute, Ill.Stat. Ann. c. 110 § 17(1):

Under the Illinois statute, personal jurisdiction over a nonresident defendant does not depend upon the physical presence of the defendant within the state; where a plaintiff's claims arise from acts or transactions committed by the nonresident defendant, personal jurisdiction over the defendant may be obtained if the acts or transactions have a substantial connection with the former state. citations omitted The Illinois courts have liberally construed this "substantial connection" requirement and have held on at least two instances that a single phone call into the forum state could provide the basis for personal jurisdiction over a nonresident defendant.

Id. at 780. The Court went on to find personal jurisdiction over a non-resident defendant proper where the defendant had an open-running credit account with a Delaware plaintiff and placed in excess of 500 orders with that plaintiff. Id. at 781. In the instant case, Special Electric while in Wisconsin is alleged to have referred an unsolicited purchase order to an affiliated corporation. Huxley points to no act of Special Electric in Delaware such as a phone call into the state that establishes an adequate basis to extend personal jurisdiction. It cannot be said that Special Electric's referral indicates that it purportedly availed itself of the privilege of acting in the forum state or caused a...