Optico Corporation v. Standard Tool Company

• Decision Date: 14 May 1968
• Docket Number: Civ. A. No. 42931.
• Parties: OPTICO CORPORATION v. STANDARD TOOL COMPANY.
• Court: U.S. District Court — Eastern District of Pennsylvania

285 F. Supp. 46

OPTICO CORPORATION v. STANDARD TOOL COMPANY.

Civ. A. No. 42931.

United States District Court E. D. Pennsylvania.

May 14, 1968.

Gerald Gornish, Goodis, Greenfield, Narin & Mann, Philadelphia, Pa., for plaintiff.

Grahame P. Richards, Jr., and David F. Maxwell, Obermayer, Rebmann, Maxwell & Hippel, Philadelphia, Pa., for defendant.

OPINION AND ORDER

TROUTMAN, District Judge.

Plaintiff has instituted this action against Standard Tool Company to recover damages for breach of a contract whereby defendant had agreed to manufacture a two-cavity injection mold to plaintiff's specifications and based upon models to be supplied by plaintiff. The defendant, on whom service of process was made pursuant to Rule 4(d) (3) of the F.R.Civ.P., has moved, pursuant to Rule 12(b) of the F.R.Civ.P., to dismiss this action for lack of jurisdiction over the person and improper venue; or, in the event jurisdiction and venue are proper, a stay of these proceedings pending submission of the dispute to arbitration in accordance with the terms of the contract.

There is no dispute that the method of service in this case upon an officer of the defendant was in accordance with Rule 4(d) (3). However, service upon a foreign corporation is not valid service unless there exists an adequate basis for the assertion of in personam jurisdiction over the nonresident. We are therefore here concerned with the circumstances under which a nonresident corporation is subject to service as contrasted with the method and manner of making service.

In addition to the question of when a Federal Court may subject a nonresident corporation to its jurisdiction, there is a problem of what law is to determine the jurisdictional question in diversity cases. Under Arrowsmith v. United Press International, 320 F.2d 219 (2nd Cir. 1963),¹ the amenability of a foreign corporation to service of process is governed not by Federal, but by State standards, as limited by the Due Process clause of the Fourteenth Amendment. In Pennsylvania:

15 P.S. § 2011(C)

"For the purposes of determining jurisdiction of courts within this Commonwealth, the entry of any corporation into this Commonwealth for the doing of a series of similar acts for the purpose of thereby realizing pecuniary benefit or otherwise accomplishing an object, or doing a single act in this Commonwealth for such purpose, with the intention of thereby initiating a series of such acts, shall constitute `doing business'."

The issue upon which disposition of this motion lies therefore is whether the defendant was "doing business" in Pennsylvania within the meaning of the statute.² The burden of establishing that the defendant did business in Pennsylvania at the time of the purported service rests upon plaintiff. Sherman v. Weber Dental Manufacturing Company, Civil No. 41240, 285 F.Supp. 114 (E.D.Pa.1967).

An examination of the record discloses³ that defendant is a Massachusetts corporation engaged in the manufacture of specialized plastic injection molds, fabricating equipment and castings. Its principal place and only place of business is Massachusetts. It maintains no office, plant or other business location in Pennsylvania. It is not and at no time has been registered to do business in Pennsylvania. It maintains no office, bank account, mailing address, telephone listing, or other business facility within the Commonwealth. It has no affiliates or subsidiaries which engage in business in this State. It owns no Pennsylvania property of any kind and has never paid, or been called upon to pay, any Pennsylvania tax.

Defendant maintains a national market for its product by advertising in three nationally circulated publications. Any business it does in Pennsylvania is transacted either through manufacturers' sales representatives or by direct contact. All sales through manufacturer's sales representatives are subject to final approval in Massachuetts where the orders are accepted or rejected. All sales by direct contact are normally negotiated by mail, telephone and personal confrontation in Massachusetts.

This record discloses no contacts within the Commonwealth of Pennsylvania which might conceivably render the defendant amenable to in personam jurisdiction, except the following:

1. Out of a total annual average sales volume of two million dollars the defendant made annual average sales in Pennsylvania of approximately $150,000.

2. At the behest of customers and/or for the purpose of generating goodwill, members of the sales staff of Standard Tool visit customers located in Pennsylvania not more than twice in any given year.

3. Most products sold in Pennsylvania are shipped directly from the manufacturing plant of defendant to the customer via common carrier; however, on rare occasions they are transported personally by the defendant.

4. All products sold in Pennsylvania are serviced by the defendant; however, visits by employees of defendant for the purpose of servicing the products sold are only made on the average of twice a year.

5. Officers or employees of the defendant may visit Pennsylvania once a year for a national plastics industry convention or for pleasure.

6. The manufacturer's sales representatives which solicited business for the defendant in Pennsylvania were Valley Forge Machinery Company and Stanley Berg Machinery Company. Valley Forge Machinery did not solicit directly for the defendant but through Kavanagh Sales, a sales organization separate and distinct from defendant although owned by the same principals. At the time of service in this action, and for approximately one year prior thereto, Kavanagh Sales was no longer operating and Valley Forge Machinery was not soliciting business for the defendant. At the time of service, and continuing to date, Stanley Berg Machinery Company acts as a sales representative for defendant in Pennsylvania. However, both Valley Forge and Stanley Berg operated as independent contractors upon a strict commission basis and all sales solicited by them were made subject to the approval of either the defendant or Kavanagh Sales in Massachusetts.

It is readily apparent, and undisputed by the defendant, that the sales by defendant in Pennsylvania constitute a "series of similar acts for the purpose of thereby realizing pecuniary benefit" within the meaning of 15 P.S. § 2011 (C). However, the test of whether the defendant is amenable to the jurisdiction of this Court "includes the `entry' into the Commonwealth by the foreign corporation by the physical presence of agents or property". Cecere v. Ohringer Home Furniture Co. etc., 208 Pa.Super. 138, 147, 220 A.2d 350, 356, (1966). Neither the distribution and sale of products by the defendant, Rachelson v. E. I. duPont deNemours & Co., ...