Polar Supply Co. v. Steelmaster Indus.

• Decision Date: 23 December 2005
• Docket Number: No. S-11664.,S-11664.
• Parties: POLAR SUPPLY COMPANY, INC., Appellant, v. STEELMASTER INDUSTRIES, INC., Appellee.
• Court: Alaska Supreme Court

Page 52

127 P.3d 52

POLAR SUPPLY COMPANY, INC., Appellant, v. STEELMASTER INDUSTRIES, INC., Appellee.

No. S-11664.

Supreme Court of Alaska.

December 23, 2005.

Rehearing Denied February 9, 2006.

Lea E. Filippi and William M. Bankston, Bankston, Gronning, O'Hara, Sedor, Mills, Givens & Heaphey, P.C., Anchorage, for Appellant.

James N. Leik, Perkins Coie LLP, Anchorage, for Appellee.

Before: BRYNER, Chief Justice, MATTHEWS, EASTAUGH, FABE, and CARPENETI, Justices.

OPINION

FABE, Justice.

I. INTRODUCTION

An Alaskan company, Polar Supply Company, Inc. (Polar), purchased a telescopic trolley boom from Steelmaster Industries, Inc. (Steelmaster), a Canadian corporation located in Ontario. Polar had a number of problems with the boom and brought suit against Steelmaster in the Alaska superior court. Steelmaster argued that it was entitled to dismissal for lack of personal jurisdiction, and the superior court agreed, dismissing Polar's suit.¹ We reverse because we conclude that an exercise of personal jurisdiction over Steelmaster is appropriate under Alaska's long-arm statute and conforms to the requirements of due process.

II. FACTS AND PROCEEDINGS

Polar Supply Company, Inc. is an Alaskan corporation. Steelmaster Industries, Inc. is a Canadian corporation located in Mississauga, Ontario. Presidents from both companies met for the first time in Nevada at a National Concrete Masonry Association convention. Steelmaster provided brochures and sales information about its products during the convention. Following the convention, Polar contacted Steelmaster to request a price quotation for a telescopic trolley boom. Steelmaster sent a sales proposal to Polar on January 20, 2000, quoting a price of $44,950 for a 120-35TC telescopic boom. Polar accepted this proposal in April 2000. Polar discussed the possibility of becoming a dealer for Steelmaster in Alaska and requested an eighteen percent "dealer discount," but there is no evidence that the parties entered into a dealership agreement or that the proposed discount was accepted by Steelmaster. Steelmaster's contract of sale includes a one-year warranty covering product defects.

Steelmaster manufactured the boom in Ontario. Polar purchased and shipped the boom free on board (F.O.B.) from Steelmaster's manufacturing facility in Ontario to a company in Washington where the boom was mounted onto a truck. Polar then had the truck and boom shipped from Washington to Alaska, where it was load tested. The boom failed to sustain the radius load represented by Steelmaster and was deemed unsuitable for the truck on which it was mounted.

On May 1, 2003, Polar filed suit against Steelmaster in Alaska, seeking consequential damages for loss of production, loss of use, loss of jobs, and loss of profits. Steelmaster immediately moved for dismissal for lack of personal jurisdiction and insufficient service of process. Polar then cured any defect in service of process with service of a supplemental summons and moved for permission to conduct jurisdictional discovery as to whether Steelmaster had sufficient ongoing contacts with Alaska to support an exercise of specific jurisdiction.

On July 30, 2004, the superior court ordered the matter dismissed without prejudice but did not reference Polar's request for discovery.² On August 25, 2004, a final judgment was entered awarding $2,166.45 in attorney's fees and costs to Steelmaster. Polar appeals.

III. DISCUSSION

A. Standard of Review

We review questions regarding personal jurisdiction de novo because "[j]urisdictional issues are questions of law subject to this court's independent judgment."³ We adopt "the rule of law that is most persuasive in light of precedent, reason, and policy" when it comes to jurisdictional questions.⁴

B. The Exercise of Personal Jurisdiction over Steelmaster Is Proper.

Alaska's long-arm statute, AS 09.05.015, is broad and refers to several specific circumstances under which personal jurisdiction may be exercised. These circumstances are not meant to be exclusive⁵ but rather provide "an authoritative basis for simplifying most jurisdictional questions. By furnishing a list of specific grounds providing jurisdiction, the statute avoids converting every jurisdictional issue into a constitutional question."⁶

For those circumstances that do not fit within the terms of the statutory provisions, AS 09.05.015(c) states that "[t]he jurisdictional grounds stated in (a)(2)-(10) of this section are cumulative and in addition to any grounds provided by the common law." The insertion of this language into the statute manifests the legislature's "intent to have the long-arm statute co-extensive with the Fourteenth Amendment."⁷ As we recently explained in Cramer v. Wade, "even if they had merit, [the defendant's] specific long-arm challenges would not be determinative" because "our long-arm statute's catch-all subsection (c) extends to any case falling outside the statute's other subsections in which the exercise of jurisdiction is permissible under the Fourteenth Amendment."⁸ Thus, we need not determine whether this case fits perfectly within subsections (a)(4) or (a)(5) if we conclude that due process permits the exercise of jurisdiction over Steelmaster.

Arguably, jurisdiction over Steelmaster is specifically authorized in this case by two subsections of AS 09.05.015(a). Subsection (a)(4)⁹ provides jurisdiction in an action "claiming injury to person or property in [Alaska] arising out of an act or omission out of [Alaska]." This provision is applicable if (a) at the time of injury, solicitation or service activities were carried on in Alaska by or on behalf of the defendant or (b) products, materials, or things processed, serviced, or manufactured by the defendant were used or consumed in Alaska in the ordinary course of trade.¹⁰ Polar claims that economic losses are sufficient to constitute injury under subsection (a)(4) of the long-arm statute. The additional requirements of subsection (a)(4) are satisfied by Steelmaster having sold a product to Polar, an Alaskan company. Steelmaster's contention that subsection (a)(4)(B) is inapplicable where only a single product is sold because the statutory language refers in the plural to "products, materials, or things" manufactured by the out-of-state defendant is not an argument in keeping with the reach of the long-arm statute or with our previous cases.¹¹ Nevertheless, it does remain unclear whether monetary damages stemming from breach of contract actions, rather than tort actions, can constitute "injury to property," as required by the statutory provision and this case therefore fits uneasily into the requirements of subsection (a)(4).

Subsection (a)(5)¹² of the long-arm statute specifies an array of contract actions that provide a basis for jurisdiction, including an action "that relates to goods . . . actually received by the plaintiff in this state from the defendant without regard to where delivery to the carrier occurred."¹³ Subsection (a)(5)(C) further provides for jurisdiction in an action that "arises out of a promise, made anywhere to the plaintiff . . . by the defendant to deliver or receive in this state or to ship from this state goods, documents of title or other things of value."¹⁴ At oral argument, Steelmaster disputed subsection (a)(5)'s applicability, relying on the fact that Steelmaster itself never shipped the boom to Alaska but instead arranged for Polar to ship it from Steelmaster's manufacturing facility to Washington, where it was then mounted onto the truck and subsequently shipped to Alaska. Solely because of the nature of the shipping arrangements, then, the case does not fall easily within the requirements of subsection (a)(5) of the long-arm statute.

Since the unique nature of this contract makes this case difficult to categorize within the enumerated provisions of the statute, we find it more appropriate to examine jurisdiction using the standards set by AS 09.05.015(c), which authorizes Alaska's courts "to assert jurisdiction to the maximum extent permitted by due process."¹⁵ We traditionally analyze personal jurisdiction under the long-arm statute by examining the requirements of due process. As the United States Supreme Court explained in International Shoe Co. v. Washington, due process requires that a defendant have "minimum contacts" with the forum state such that maintaining a suit in the forum state "does not offend `traditional notions of fair play and substantial justice.'"¹⁶

"When a controversy is `related to' or `arises out of' a defendant's contacts with the forum, the exercise of jurisdiction is said to be `specific' and is justified on the basis of the relationship among the defendant, the forum, and the litigation."<sup>17</sup> An out-of-state defendant who has not consented to suit in the forum state is said to have "fair warning" that his conduct will render him liable to suit if he has "purposefully directed" his activities at residents of the forum<sup>18</sup> and the litigation arises out of or relates to those activities.<sup>19</sup> The United States Supreme Court has further emphasized that "parties who `reach out beyond one state and create continuing relationships and obligations with citizens of another state' are subject to regulation and sanctions in the other State for the consequences of their activities."²⁰ And we have recognized that "[t]he contract along with such other factors as `prior negotiations and future consequences . . . and the parties' actual course of dealing . . . must be evaluated in determining whether the defendant purposefully established minimum contacts with the forum.'"²¹ We have found it particularly significant when an out-of-state defendant solicited, initiated, or directly contacted the Alaskan resident.²²

In this instance, Steelmaster traveled to Nevada to a trade show of the National Concrete Masonry Association in order to market its equipment. Steelmaster sought purchasers for its products at...