Photolab Corp. v. Simplex Specialty Co., 85-5306
| Decision Date | 05 December 1986 |
| Docket Number | No. 85-5306,85-5306 |
| Parties | PHOTOLAB CORPORATION, a Minnesota Corporation, Appellee, v. SIMPLEX SPECIALTY CO., a New York corporation; Hostert North America, Inc., a New Jersey corporation; and Carl Hostert, GmbH, Carl Hostert KG; and Carl Hostert GmbH and Co., KG; companies organized under the laws of the Federal Republic of Germany, Appellants. |
| Court | U.S. Court of Appeals — Eighth Circuit |
John B. Bellows, Jr., St. Paul, Minn., for appellants.
Terry L. Slye, St. Paul, Minn., for appellee.
Before LAY, Chief Judge and ROSENN * and McMILLIAN, Circuit Judges.
Carl Hostert, GmbH and Co., KG appeals from a final judgment entered in the District Court 1 for the District of Minnesota in favor of Photolab Corp. (Photolab) in a breach of contract suit. For reversal Carl Hostert, GmbH and Co., KG argues that the district court erred in (1) denying its motion to dismiss for insufficiency of service of process, (2) allowing Photolab at the conclusion of the trial to amend its complaint to add Carl Hostert, GmbH and Co., KG as an additional defendant, and (3) finding that Carl Hostert, GmbH and Co., KG appeared in the action below. For the reasons discussed below, we affirm.
The defendants are three West German business entities controlled by Carl Hostert, a citizen and resident of the Federal Republic of Germany. Photolab Corp. v. Simplex Specialty Co., No. 4-84-Civ. 764, slip op. at 2 (D.Minn. Jul. 18, 1985). Only one of these entities, Carl Hostert, GmbH and Co., KG (Hostert KG), is a party to this appeal. Hostert KG is engaged in the design, manufacture and distribution of photographic film processing equipment and other related photographic equipment. Carl Hostert, KG is also engaged in the photographic equipment business and shares its principal office with Hostert KG. The district court made no findings and the record does not clearly indicate whether Carl Hostert, GmbH ever existed. The answer filed in this suit indicated that Carl Hostert, GmbH was a corporation and manufacturer.
At oral argument the parties indicated that Carl Hostert, GmbH was most closely analogous to an American corporation, Carl Hostert, KG was a partnership, and Hostert KG was a limited partnership with a corporation as one of the partners.
The plaintiff is Photolab, a Minnesota corporation engaged in the business of photographic film processing. In the spring of 1983, Charles Specht, the controlling shareholder and president of Professional Photo Services Corp., negotiated for and subsequently purchased certain assets of Photolab, Inc., a corporation owned by Richard Anderson. After the purchase, Specht changed the name of his corporation from Professional Photo Services Corp. to Photolab Corp.
During the period when Anderson and Specht were negotiating the purchase of the assets of Photolab, Inc., Anderson was also negotiating with Simplex Specialty Co., (Simplex), a New York corporation, for the purchase of two photographic film processing machines. In March 1983, while Anderson and Specht were attending a trade show, Anderson introduced Specht to Robert Hall of Simplex and Klaus Niepenberg of Carl Hostert, KG. Anderson and Specht later agreed that Specht would complete the purchase of the film processors from Simplex. The processors were installed by Klaus Niepenberg and a Simplex crew in April 1983 prior to the sale of the business assets of Photolab, Inc.
Photolab alleges that the film processors malfunctioned from the time they were installed. Seeking a remedy for the problems, Photolab's employees repeatedly telephoned Simplex and Niepenberg from June 1983 to July 1984. In July 1984 Simplex went out of business. Several former Simplex employees incorporated as Hostert North America, Inc., a wholly owned subsidiary of Hostert Co. in West Germany.
In August 1984 Photolab filed suit against Simplex, Hostert North America, Inc., and Carl Hostert, GmbH in the federal district court in Minnesota. Service of process upon Carl Hostert, GmbH was attempted by international certified mail sent directly to "Carl Hostert, GmbH." Photolab received a return receipt signed "Hostert." Photolab also received a letter dated September 11, 1984, from Carl Hostert on the stationery of Carl Hostert, GmbH and Co., KG, indicating that the demand for payment was rejected because Photolab did not receive delivery of the machinery from Carl Hostert nor had Hostert received any payment from Photolab.
By letter dated October 23, 1984, Photolab advised Carl Hostert, GmbH that Photolab would seek a default judgment if Carl Hostert, GmbH did not respond within fifteen days. Carl Hostert, in a letter dated October 31, 1984, indicated that Hostert had had no contact with Photolab and advised Photolab to contact the supplier regarding the demand. In December 1984 Carl Hostert, GmbH filed an answer to Photolab's complaint. The answer, prepared by an American attorney, stated that Carl Hostert, GmbH was a corporation organized under the laws of the Federal Republic of Germany and was a manufacturer of film processors and related equipment. The answer also alleged that the district court had no jurisdiction over Carl Hostert, GmbH or the subject matter of the lawsuit.
In May 1985 Photolab submitted interrogatories and requests for documents to Carl Hostert, GmbH. Carl Hostert, GmbH did not respond to these discovery requests.
On July 26, 1985, Carl Hostert, GmbH's American attorney, filed a motion to dismiss for lack of jurisdiction and failure of service. The attorney asserted that the service of process was improper because (1) neither Carl Hostert nor an agent of Carl Hostert, GmbH had been personally served and (2) the service was not addressed and dispatched by the clerk of the court as required by Fed.R.Civ.P. 4(i). The attorney also filed a motion for leave to withdraw the answer because it contained inaccurate information or a continuance. The attorney further stated that he had been retained at the last minute and had to hastily file the answer in order to avoid a default judgment. The district court denied the motions.
Neither Carl Hostert nor any witnesses for Carl Hostert, GmbH appeared at the trial. At the conclusion of the trial, Photolab was permitted to amend the complaint to add as defendants Carl Hostert, KG and Hostert KG. The district court concluded that the Hostert companies received actual notice of the action and were represented at trial. Photolab Corp. v. Simplex Specialty Co., slip op. at 7. The district court further concluded that the Hostert companies' objections to adequacy of process, adequacy of service of process and lack of personal jurisdiction were waived pursuant to Fed.R.Civ.P. 12(h) because the Hostert companies failed to make timely objection. Id. at 3-4.
On the merits, the district court found that Simplex was the agent of the Hostert companies and the Hostert companies were estopped from denying responsibility for Simplex's actions. Id. at 6. The Hostert companies were held liable for breach of express and implied warranties of merchantability. Damages in the amount of $56,585 were awarded to Photolab against Carl Hostert, GmbH; Carl Hostert, KG; and Hostert KG jointly and severally. Id. at 8. This appeal followed.
Hostert KG initially argues that the district court erred in denying the motion to dismiss on the basis of inadequacy of service of process. Hostert KG contends that service on West German corporations is governed by the Convention on the Service Abroad of Judicial Documents, Feb. 10, 1969, 20 U.S.T. 361; T.I.A.S. No. 6633; 658 U.N.T.S. 163, which is commonly called the Hague Convention. This multi-national treaty was entered into by the United States on February 10, 1969, and ratified with reservations by the Federal Republic of Germany. West Germany specifically rejects service of...
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