PAN AMERICAN AIR. v. Consolidated Vultee Air. Corp.

• Decision Date: 28 December 1949
• Docket Number: Civ. 50-788.
• Citation: 87 F. Supp. 926
• Parties: PAN AMERICAN AIRWAYS, Inc. v. CONSOLIDATED VULTEE AIRCRAFT CORPORATION et al.
• Court: U.S. District Court — Southern District of New York

87 F. Supp. 926

PAN AMERICAN AIRWAYS, Inc. v. CONSOLIDATED VULTEE AIRCRAFT CORPORATION et al.

Civ. 50-788.

United States District Court S. D. New York.

December 28, 1949.

Haight, Deming, Gardner, Poor & Havens, New York City, for plaintiff.

Mendes & Mount, New York City, for defendant, Consolidated Vultee Aircraft Corporation.

Aranow, Brodsky, Einhorn & Dann, New York City, for defendant, Saval, Inc.

NOONAN, District Judge.

Defendant, Saval, Inc., has made several motions in this action:

I. To dismiss the action, or in lieu thereof, quashing the return of service of the summons on the grounds that:

(a) Saval, Inc. is not amenable to service in New York;

(b) That it was not properly served with process;

II. To dismiss the action on the ground that the Southern District of New York is not a proper forum for the trial of said action.

III. In the alternative, to transfer this action to the United States District Court, for the Southern District of California, Central Division, because of forum non conveniens.

IV. In the alternative, for an order staying all proceedings in this action before this court pending the determination of an action between the plaintiff, Pan American Airways, Inc. and defendant, Saval, Inc. upon the same cause in the State Court of California.

This is an action by Pan American Airways, Inc., a New York corporation, with principal offices in the City and State of New York against Consolidated Vultee Aircraft Corporation, a Delaware corporation, having its plant and offices in the State of California, with license to do business in the State of New York and Saval, Inc., a California corporation, not licensed to do business in New York, but maintaining an office in Hempstead, New York.

The complaint alleges both breach of warranty and negligence on the part of defendant, Saval, Inc., and negligence on the part of the defendant, Consolidated Vultee Aircraft Corporation. The defendant, Saval, Inc. is the moving party. Defendant, Consolidated Vultee, has joined with defendant, Saval, Inc., in the motion to transfer this cause to California.

The present action was commenced on July 14, 1949. It seeks to recover the cost of repairs to an aircraft owned by the plaintiff which was damaged in Havana, Cuba, on July 24, 1948. Service of the summons and complaint was made on defendant, Consolidated Vultee Aircraft Corporation, on July 15, 1949. Service was not effected on Saval, Inc., in New York, until July 29, 1949. Meanwhile, Pan American Airways, Inc., apparently mindful of a one year statute of limitations in Cuba, where the accident occurred, commenced an action in the Superior Court in California, on July 22, 1949, in which the defendant, Saval, Inc. has voluntarily entered an appearance. Pan American alleges that the reason that the action was brought in California was to insure that Saval, Inc. would be subject to the jurisdiction of a court, prior to the expiration of the one year statute of limitations.

I. Motion to dismiss or, in lieu thereof, to quash or set aside service of the summons.

This motion, by defendant, Saval, Inc., is based on two grounds:

(a) that it was not amenable to service in New York;

(b) that it was not properly served with process.

The defendant, Saval, is a California corporation engaged in the manufacture and sale of hydraulic, fuel and air control equipment. Its principal office and plant are located in California. It does maintain an office in Hempstead, New York. This office is described by Saval in advertisements and on its stationery as a branch office. In this office the defendant employs two men who are described as "Sales Engineers." The duties of the two employees are limited (accordingly to defendant Saval) to the solicitation and forwarding of orders to the home office. They are not authorized to accept orders; the prices they quote to customers are fixed by the home office; they are not permitted to accept payment from customers; no corporate bank account is maintained here. It is not alleged that the cause of action arose out of any activity of Saval here.

The question of validity of service of process upon a foreign corporation has been one of frequent recurrence before the courts. The variables present in each case account for lack of any well defined formula for determining what constitutes the doing of business by such a corporation, so as to subject it to a particular jurisdiction.

In Hutchinson v. Chase & Gilbert, 2 Cir., 45 F.2d 139, 140, Judge Hand said: "The theory of personal jurisdiction in an action in personam is, ordinarily at any rate, derived from the power over the defendant, consequent upon his presence within the state of the forum. McDonald v. Mabee, 243 U.S. 90, 37 S.Ct. 343, 61 L.Ed. 608, L.R.A.1917F, 458.

The Supreme Court in International Shoe Co. v. State of Washington, 326 U.S. 310 at page 316, 66 S.Ct. 154, 158, 90 L.Ed. 95, 161 A.L.R. 1057 speaking of the corporate personality as a fiction, states: "* * * that unlike an individual its `presence' * * * can be manifested only by activities carried on in its behalf by those who are authorized to act for it."

The term "presence" is used merely to symbolize those activities of the corporation's agents within the state which the courts will deem to be sufficient to satisfy the demands of due process. Hutchinson v. Chase & Gilbert, supra.

I, therefore, turn to a consideration of the activities of Saval within this state. The course of conduct of the defendant, Saval, in New York is not intermittent or sporadic. It maintains an office here and has done so for a period well over a year. There is continuous activity in the solicitation of orders. It does not appear to the court how substantial were the the responses to Saval's solicitations (i.e. the volume of business Saval realized as a direct result of its maintaining an office and employing sales personnel in New York), but it would appear to be a logical assumption that the business was sufficient to induce Saval to continue to maintain its office and the employees mentioned. In considering Saval's activities some weight must be given to its advertisement in an aeronautical magazine wherein it sets forth the fact that it has a branch office at "260 Front St., Hempstead, Long Island, New York." On the door of the office appears the name, "Saval, Inc.", and the company is listed in the Nassau County Telephone Book.

In Green v. Chicago, Burlington & Quincy R. Co., 205 U.S. 530, 531, 27 S.Ct. 595, 51 L.Ed. 916, the Supreme Court held that mere solicitation was not sufficient to constitute "doing business". Later, in International Harvester v. Kentucky, 234 U.S. 579, 581, 34 S.Ct. 944, 58 L.Ed. 1479, the Court held that solicitation plus other activities would be sufficient, and, in referring to the Green case, labelled it as an "extreme case".

In Hutchinson v. Chase & Gilbert, supra, Judge L. Hand said: "Possibly the maintenance of a regular agency for the solicitation of business will serve without more. The answer made in Green v. C., B., & Q. R. Co., 205 U.S. 530, 27 S.Ct. 595, 51 L.Ed. 916, and People's Tobacco Co. v. American Tobacco Company, 246 U.S. 79, 38 S.Ct. 233, 62 L.Ed. 587, Ann.Cas. 1918C, 537, perhaps becomes somewhat doubtful in the light of International Harvester Co. v. Kentucky, 234 U.S. 579, 34 S.Ct. 944, 58 L.Ed. 1479, and, if it still remains true, it readily yields to slight additions."

In Barnett v. Texas & P. Ry. Co., 2 Cir., 145 F.2d 800, the court, commenting on this trend, found as more than "slight additions" the actual sale of tickets, and issuance of bills of lading, even though these acts were, in fact, infrequent, stressing the point that such acts were authorized.

There is, too, the dicta in Frene v. Louisville Cement Co., 77 U.S.App.D.C. 129, 134 F.2d 511, 146 A.L.R. 926, that very little more than mere solicitation is now required to afford a sufficient basis for finding a foreign corporation is present in a state for the purposes of jurisdiction. In Snyder v. J. G. White Engineering Corp., D.C., 60 F.Supp. 789, at page 791, Judge Rifkind discusses and reviews this problem and evolves a simple test: "that the maintenance of an office, plus the regular solicitation of business, constitutes `transacting business', for the purpose of subjecting a corporation so engaged to a given jurisdiction."

Further, in that case, the court reasoned that "solicitation rarely exists in the pure form, the `slight additions' are generally present". In the case before us, the maintenance of the office, occupied by the "Sales Engineers", clearly indicates something more than mere solicitation. I do not believe that the fact that the employees here lack the authorization for final contracting is controlling.

Appraising all the facts before me, I conclude that the defendant Saval's activities were such as to subject it to jurisdiction here; "* * * the problem must be solved in the light of commercial actuality, not in the aura of juristic semantics." Echeverry v. Kellogg Switchboard & Supply Co., 2 Cir., 175 F.2d 900, 903.

However, there is more to corporate "presence" than the mere consideration of the activities of the corporation. In Latimer v. S/A Industrias Reunidas F. Matarazzo, 2 Cir., 175 F.2d 184, the Court, in analyzing the International Shoe Company case, supra, felt that the language therein meant that it was not enough, constitutionally, to subject a corporation to a court's jurisdiction that it did some continuous business within the state of the forum; the injustice might be too great, if it were compelled to stand trial there, merely on that account, and regardless of the attending "inconveniences." This thought was first indicated in Hutchinson v. Gilbert & Chase, supra, wherein the court said that "presence" includes a second factor, namely, an "estimate of the inconveniences".

As to this factor of the attending inconveniences in Kilpatrick v. Texas & P. Ry. Co., 2...