Peanut Corp. of America v. Hollywood Brands, Inc.

• Decision Date: 15 December 1982
• Docket Number: No. 82-1574,82-1574
• Parties: PEANUT CORPORATION OF AMERICA, International Marketing Associates, Inc., Respondents, v. HOLLYWOOD BRANDS, INC., Consolidated Foods Corporation, Petitioners.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 311

696 F.2d 311

PEANUT CORPORATION OF AMERICA, International Marketing

Associates, Inc., Respondents, v. HOLLYWOOD BRANDS, INC., Consolidated Foods Corporation, Petitioners.

No. 82-1574.

United States Court of Appeals,

Fourth Circuit.

Argued Oct. 7, 1982.

Decided Dec. 15, 1982.

Robert C. Wood, III, Lynchburg, Va. (Bernard C. Baldwin, Jr., Edmunds, Williams, Robertson, Sackett, Baldwin & Graves, Lynchburg, Va., on brief), for petitioners.

S.J. Thompson, Jr., Lynchburg, Va. (Gregory P. Cochran, Caskie, Frost, Hobbs, Thompson, Knakal & Alford, Lynchburg, Va., on brief), for respondents.

Before WIDENER, HALL and MURNAGHAN, Circuit Judges.

MURNAGHAN, Circuit Judge:

The appeal raises questions concerning the scope and constitutionality of Virginia's long-arm statute. Va.Code Sec. 8.01-328.1 et seq. The district court, in a diversity case, had denied the motion of Hollywood Brands, Inc. ("Hollywood") to dismiss for lack of in personam jurisdiction. The district court found, however, that there was substantial ground for difference of opinion upon the issue and that an immediate appeal from its order might materially advance the ultimate termination of the litigation. Thereupon, pursuant to FRAP 5, we granted Hollywood's petition for an interlocutory appeal.

I. RELEVANT FACTS

Hollywood is an Illinois corporation that manufactures and distributes peanut-filled candy bars. Hollywood solicits business throughout Virginia through the use of manufacturers' representatives. Although Hollywood uses brokers in Virginia to sell its product, customers are invoiced directly by Hollywood. In marketing its product in Virginia, Hollywood uses numerous advertising methods. Substantial revenues are derived from sales in Virginia. Hollywood purchases a significant portion of its peanuts, one of its essential ingredients, from Virginia corporations.

In January, 1980, Hollywood experienced a fire in which its peanut processing operation was destroyed. Hollywood then set up an interim operation for peanut processing, contracting with outside concerns for its peanut supply. Hugh Parnell, owner of Peanut Corporation of America ("PCA") and International Marketing Associates, Inc. ("IMA") conducted a peanut processing business from his residence in Lynchburg, Virginia; PCA and IMA maintained warehouses in Texas. In late 1980, Parnell contacted Hollywood to inquire whether it would be interested in purchasing some peanuts. Subsequently, Hollywood sent two purchase orders to IMA at an address Differences of opinion arose as to Hollywood's expected performance under the contract. Hollywood and IMA sent correspondence between Illinois and Virginia attempting to rectify the situation.

in Virginia. The second purchase order, a modification letter, served as the basis for the contract. The actual contract was finally made between the parties by a third purchase order which varied slightly the terms of the second purchase order. The third purchase order was sent from Illinois to Texas. By an addendum to the third purchase order, PCA assigned all its rights under the contract to North Carolina National Bank.

After accepting a large quantity of peanuts, Hollywood considered its obligation to the North Carolina National Bank satisfied. Hollywood thereafter sent a letter to IMA in Virginia advising IMA that it had fulfilled its commitment under the contract. The balance of the order was cancelled by means of a change order which was sent to PCA in Texas. The North Carolina National Bank reassigned all its rights to IMA.

IMA and PCA then sued Hollywood for breach of the contract.

II. THE TWO STEP INQUIRY

When jurisdiction is sought pursuant to a long-arm statute, a dual analysis is normally required: first, it must be determined whether the statutory language, as a matter of construction, purports to assert personal jurisdiction over a defendant; and second, assuming that the answer to the first question is affirmative, it must be determined whether the statutory assertion of personal jurisdiction is consonant with the Due Process Clause of the United States Constitution. Haynes v. James H. Carr, Inc., 427 F.2d 700, 703 (4th Cir.1970). The two inquiries may be interrelated, however. The Virginia long-arm statute, as in the case of other state statutes as well, ¹ has been construed to extend in personam jurisdiction to the outmost perimeters of due process. See Kolbe, Inc. v. Chromodern Chair Co., Inc., 211 Va. 736, 740, 180 S.E.2d 664, 667 (1971) ("It is manifest that the purpose of Virginia's long arm statute is to assert jurisdiction over nonresidents who engage in some purposeful activity in this State to the extent permissible under the due process clause."); Carmichael v. Snyder, 209 Va. 451, 456, 164 S.E.2d 703, 707 (1968) ("Admittedly, Chapter 4.1, Title 8 of the Code is a deliberate and conscious effort on the part of the General Assembly of Virginia to assert jurisdiction over nonresident defendants to the extent permissible by the Due Process Clause.").

Counsel for Hollywood conceded at oral argument that the statute could be applied constitutionally to confer jurisdiction and restricted argument to the proposition that, while Virginia could have written the statute in such a way as constitutionally to subject Hollywood to the jurisdiction of its courts, the Commonwealth has, nevertheless, not, in point of fact, done so. While that position is difficult to reconcile with the announced rule of Virginia jurisprudence that the words "transacting any business in this Commonwealth" reach "to the extent permissible under the due process clause," that legal proposition has not been tested in a context quite like the one presented here. We, therefore, from an abundance of caution, proceed to the customary two step analysis.

A. The Statutory Scheme

The Virginia long-arm statute, Va.Code Sec. 8.01-328.1, provides in pertinent part:

A. A court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a cause of action arising from the person's:

1. Transacting any business in this Commonwealth;

* * *

* * *

Paragraph (1) of the statute extends the court's personal jurisdiction to encompass all nonresidents who transact any business within Virginia so long as the cause of action asserted arises from the nonresident's transaction of business. One act of transacting business will suffice. Kolbe, Inc. v. Chromodern Chair Co., supra.

Although Hollywood argues that it had no contacts with Virginia concerning the disputed contract, the modification letter, which became a part of the basic contract was addressed to and received by IMA in Virginia,...