Processing Research, Inc. v. Larson

• Decision Date: 11 May 1988
• Docket Number: Civ. A. 88-0364-A.
• Citation: 686 F. Supp. 119
• Court: U.S. District Court — Eastern District of Virginia
• Parties: PROCESSING RESEARCH, INC., Plaintiff, v. Lee H. LARSON, Defendant.

686 F. Supp. 119

PROCESSING RESEARCH, INC., Plaintiff, v. Lee H. LARSON, Defendant.

Civ. A. 88-0364-A.

United States District Court, E.D. Virginia.

May 11, 1988.

Ralph V. DeMartino, McLean, Va., Paul A. Fischer, Washington, D.C., for plaintiff.

Harold H. Dutton, Jr., Manassas, Va., for defendant.

MEMORANDUM OPINION

ELLIS, District Judge.

This diversity contract, warranty and fraud action grows out of the sale of a used airplane by a Colorado individual to a Virginia corporation. The action is before the Court on defendant's Rule 12(b)(2), Fed. R.Civ.P., motion to dismiss for lack of personal jurisdiction and it tests the constitutional reach of Virginia's Long Arm Statute, Va. Code § 8.01-328.1 (1987).

Facts

The essential jurisdictional facts are not in substantial dispute. Plaintiff, Processing Research, Inc. (PRI), a Virginia corporation, is engaged in the business of electronic systems design and analysis. In September, 1987, PRI decided to purchase an aircraft to fly company personnel to and from business meetings. To fill the bill, the aircraft had to be a pressurized, twinengine model capable of flying at altitudes as high as 30,000 feet. PRI further concluded that a used aircraft would be suitable provided its condition permitted safe operation for a period of two to three years prior to requiring a major engine overhaul. The search for an appropriate machine led PRI'S president, Stewart, to the Volume 50, No. 32 issue of Trade-A-Plane, a nationally circulated periodical published thrice monthly. PRI's president was a subscriber. An advertisement on page 71 of this issue caught Stewart's eye. It stated, in whole,

1976 B60, 2800TT, NDH, SMOH L & R, 125 SPOH L & R, May annual, 135 certified. Collins Microline, dual transponder, Century IV FD with YD, phone, radar altimeter, RDR-150, 232 gallons air, known ice, excellent paint and interior, trade or finance. Lee Larson, 303, 452-6661. s3

Attracted by this advertisement, Stewart called defendant in Colorado. Defendant Larson is an individual who conducts business in Colorado as an aircraft broker. This telephone call, initiated by Stewart, lasted almost two hours. PRI alleges that in this and subsequent calls (some initiated by Stewart and some by defendant) a number of misrepresentations were made by defendant concerning the advertised Beechcraft. In late September, defendant sent by mail to PRI in Virginia a packet of information concerning the aircraft. PRI contends this packet confirmed the oral misrepresentations made by defendant in the telephone calls.

PRI ultimately decided to purchase the Beechcraft and in early October, 1987, defendant sent Stewart a form contract by mail. The purchase price was $119,850. Stewart signed the contract on behalf of PRI and sent it back to defendant in Colorado along with a down payment check in the amount of $11,985. Defendant deposited the check in his bank in Colorado. Significantly, the contract PRI signed included the following provision:

This contract shall be deemed to have been made and executed under and governed by the laws of the State of Colorado. It comprises the entire agreement pertaining to this purchase and no other agreement of any kind, written or verbal, exists in connection with this transaction.

During October, 1987, there were more telephone calls between defendant in Colorado and Stewart in Virginia. Defendant sought to assist PRI in obtaining financing from banks outside Virginia. These efforts failed to bear fruit. Ultimately, PRI obtained its own financing from Crestar Bank in Virginia. At Stewart's request, defendant provided Crestar with information by telephone concerning the aircraft.

In November, 1987, Stewart traveled to Colorado, tendered to defendant the balance due under the contract and both inspected¹ and took delivery of the aircraft, all in Colorado. PRI then had the aircraft flown to Virginia. Thereafter, PRI alleges it discovered facts about the aircraft, its equipment and its engines that were at sharp variance with the defendant's representations, on which plaintiff had relied in making the purchase. Hence this action followed.

Defendant, in his affidavit, avers that he owns no property or bank accounts in Virginia, that he has never appointed any agent for service of process in Virginia and that indeed, he has never physically been in Virginia (a lamentable admission). He also states that his only "contact with the State of Virginia has been in connection with this case, and has been limited to telephone calls with plaintiff in Virginia and forwarding of information requested by plaintiff." So far as he is aware, he has never sold an aircraft to any other resident of Virginia.

PRI asserts six causes of action in its Complaint: (1) breach of contract, (2) breach of express warranty, (3) breach of implied warranty of merchantability, (4) breach of implied warranty of fitness for a particular purpose, (5) fraud, and (6) innocent misrepresentation. Defendant, in addition to seeking dismissal on jurisdictional grounds, moved in the course of oral argument for a transfer to Colorado pursuant to 28 U.S.C. § 1404(a). In addition, transfer pursuant to Section 1406 was raised. See Goldlawr, Inc. v. Heiman, 369 U.S. 463, 82 S.Ct. 913, 8 L.Ed.2d 39 (1962); Porter v. Groat, 840 F.2d 255 (4th Cir. 1988). The Court gave both parties leave to submit memoranda on the transfer issue, as well as additional material on personal jurisdiction.

Analysis

Personal jurisdiction analysis is a two step process. First, each alleged cause of action must be measured for a fit against each alleged part of the Long Arm Statute, Va. Code § 8.01-328.1. If no fit is found, the inquiry is at an end: there is no personal jurisdiction. On the other hand, if any of the Long Arm provisions fit, a further inquiry must be made before jurisdiction can be sustained. This further inquiry is to ascertain whether the Long Arm's reach in that particular instance exceeds its constitutional grasp. See International Shoe Co. v. Washington, 326 U.S. 310, 311-313, 66 S.Ct. 154, 156-57, 90 L.Ed. 95 (1945); Hanson v. Denckla, 357 U.S. 235, 245-46, 78 S.Ct. 1228, 1235-36, 2 L.Ed.2d 1283 (1958); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 289-91, 100 S.Ct. 559, 563-64, 62 L.Ed.2d 490 (1980); Burger King Corp. v. Rudzewicz, 471 U.S. 462, 463-64, 105 S.Ct. 2174, 2177-78, 85 L.Ed.2d 528 (1985). When applied here, this two step process discloses that some portions of Virginia's Long Arm Statute reach these facts, but that this reach is beyond the statute's constitutional grasp.

PRI relies on the first five sections of the Long Arm Statute. Va.Code § 8.01-328.1(A)(1)-(A)(5). The first three do not fit. As to the first, defendant cannot be said to be "transacting any business in this Commonwealth." A settled principle, to be sure, is that a single act may constitute transaction of business under Virginia's Long Arm, provided the action arose from that one transaction. See Danville Plywood Corp. v. Plain & Fancy Kitchens, Inc., 218 Va. 533, 238 S.E.2d 800, 802 (1977); Kolbe, Inc. v. Chromodern Chair Co., 211 Va. 736, 180 S.E.2d 664, 667 (1971). But this principle simply serves to underscore that it is the nature and quality of acts and not their number that determines whether transaction of business has occurred. It does not mean that any single act suffices. Indeed, it has been held that the shipment of goods alone into a state may not constitute transaction of business.² More to the point here, it has also been held that mere telephone conversations, telexes and letters negotiating a transaction do not suffice. Unidyne Corp. v. Aerolineas Argentinas, 590 F.Supp. 391, 396 (E.D.Va.1984). In Unidyne, plaintiff sued in part on an alleged settlement agreement and the court held that plaintiff failed to carry the burden of showing that the settlement negotiations via telephone and telex communications to Virginia amounted to transacting business in Virginia. Id. at 396. The same result must obtain here. To hold otherwise is to conclude that an individual transacts business in Virginia by doing nothing more than placing a classified ad in a national periodical specializing in used aircraft and then responding to an inquiry from a prospective buyer and its bank in Virginia. Such a result would convert the Long Arm Statute from a "single act" statute to a "single act of any kind or nature whatsoever" statute, a result neither intended by the General Assembly, nor permitted by the statutory language. In sum, Virginia Code § 8.01-328.1(A)(1) does not fit the instant facts.

Neither do subsections (A)(2) or (A)(3) fit these facts. Defendant did not contract "to supply services or things in Virginia." The contract makes clear that the parties deemed the agreement made in Colorado and it is not disputed that the aircraft was delivered there as well. Thus defendant contracted in Colorado to supply an aircraft in Colorado. Similarly, tortious injury, if any, did not result from any "act or omission by defendant in Virginia."

By contrast, subsections (A)(4) and (A)(5) apparently fit these facts. Subsection (A)(4) fits the tort claims. The complaint alleges tortious injury in Virginia and it appears that the acts or omissions relied upon occurred outside Virginia. Moreover, it further appears that by receiving $119,850 for the sale of the aircraft which was to be used in Virginia, defendant derived "substantial revenue from goods used or consumed ... in this Commonwealth." Va. Code § 8.01-328.1(A)(4).³ Similarly, the warranty claims seem to fit under subsection (A)(5). The complaint alleges breaches of express and implied warranties with respect to the aircraft which defendant knew was to be used, at least in part, in Virginia and from which defendant derived substantial revenue. Since (A)(4) and (A)(5) of the Long Arm apparently reach the tort and warranty claims respectively, it is necessary next to consider whether...