Rachelson v. EI DuPont DeNemours & Co.

• Decision Date: 16 August 1966
• Docket Number: 36643.,Civ. A. No. 36632
• Parties: Louis RACHELSON v. E. I. duPONT deNEMOURS & CO. and Vic Manufacturing Co. Jacob KOACH v. E. I. duPONT deNEMOURS & CO. and Vic Manufacturing Co.
• Court: U.S. District Court — Eastern District of Pennsylvania

257 F. Supp. 257

Louis RACHELSON v. E. I. duPONT deNEMOURS & CO. and Vic Manufacturing Co.

Jacob KOACH v. E. I. duPONT deNEMOURS & CO. and Vic Manufacturing Co.

Civ. A. Nos. 36632, 36643.

United States District Court E. D. Pennsylvania.

August 16, 1966.

Morris M. Shuster, Edwin E. Naythons, and Freedman, Borowsky & Lorry, Philadelphia, Pa., for plaintiff.

K. Robert Conrad, Pepper, Hamilton & Scheetz, Philadelphia, Pa., for E. I. duPont de Nemours & Co.

Edward C. German, A. Arthur Hanamirian and LaBrum & Doak, Philadelphia, Pa., for Vic Mfg. Co.

OPINION

DAVIS, District Judge.

The plaintiffs, employees of the Sterling Equipment Company, have instituted these actions against the defendants because of alleged injuries sustained as a result of inhalation of and exposure to vapors of a duPont product called "valclene" which had escaped from drycleaning machines manufactured by Vic Manufacturing Company. The inhalation and exposure allegedly took place over a period of months in 1962 at various locations in Pennsylvania and New Jersey.

The issue now before us is the motion of Vic Manufacturing Co. to dismiss the complaint or in the alternative to quash the service of process on the ground that this court lacks jurisdiction over its person.

Since these actions are before this court solely because of diversity and Vic is a Minnesota corporation not registered to do business in Pennsylvania, we must look to the law of Pennsylvania to determine whether this defendant is amenable to process. As the federal law now stands, if the state in which we are located would not subject the foreign corporation to its jurisdiction, we as a court sitting solely in a diversity matter will not do so either. Arrowsmith v. United Press International, 320 F.2d 219 (2d Cir. 1963); Giuliano v. Alitalia Airlines, Inc., 218 F.Supp. 78 (E.D.Pa.1963); 2 Moore, Federal Practice ¶ 257.

The plaintiffs attempted service on the defendants by delivery of copy of the summons and complaint to the Secretary of the Commonwealth pursuant to the Business Corporation Law Pa.Stat.Ann. Tit. 15 § 2852-1011, subds. B & C which provides inter alia:

"B. Any foreign business corporation which shall have done any business in this Commonwealth, without procuring a certificate of authority to do so from the Department of State, shall be conclusively presumed to have designated the Secretary of the Commonwealth as its true and lawful attorney authorized to accept, on its behalf, service of process in any action arising within this Commonwealth. * * *

"C. For the purposes of determining jurisdiction of courts within this Commonwealth, the entry of any corporation into this Commonwealth for the doing of a series of similar acts for the purpose of thereby realizing pecuniary benefit or otherwise accomplishing an object, or doing a single act in this Commonwealth for such purpose, with the intention of thereby initiating a series of such acts, shall constitute `doing business.'"

To determine whether the defendant comes within the provisions of the statute, we must first examine the pertinent facts as to its business activities in Pennsylvania as developed from interrogatories answered by Vic and from the depositions of the sales manager and the president of the Sterling Equipment Company, which handles Vic products in this state.

Vic is a manufacturer of drycleaning machines and equipment with its office and plant in Minneapolis, Minnesota. Its only sales to companies in Pennsylvania have been $7800 worth of merchandise to Ruco Sales in Pittsburgh and $16,000 worth to Sterling Equipment Company in Philadelphia. Both of these companies do their own servicing, sales, and maintenance. While there is no further evidence as to Ruco's relationship with Vic, the record indicates that Sterling is a dealer which represents about one hundred companies, one of which is the defendant, and operates an exclusive dealership for it in Delaware and portions of Pennsylvania and Southern New Jersey. Ruco Sales keeps a limited inventory of Vic machines but otherwise sends a purchase order to the defendant whenever one of its customers asks for a piece of equipment it does not have in stock. The customer orders from Sterling and works out financing with it, and Sterling then makes its own separate purchase order from Vic. Vic never deals with these customers except to send the machinery to the destination which Sterling designates. The title to the machinery always passes to the dealer f. o. b. Minneapolis.

Vic may terminate the exclusive dealership contract with Sterling if a certain minimum sales quota is not met. Vic also provides its dealer with a suggested price list but the latter is free to sell and does in fact sell at the prices it itself determines. Moreover, it finds or obtains over 99% of its customers through its own efforts, without any assistance from Vic.

Vic maintains no sales representatives or agents in Pennsylvania. One of its representatives did come to Sterling's office once or twice in 1962 but the record is unclear whether this was before or after the dealership contract between it and Sterling had been signed. It never sent any servicemen into Pennsylvania. Sterling, however, at its own expense, sent one of its men to the Vic plant in Minnesota to learn how to service the machines and install them on its customer's premises.

The defendant does not advertise in any way in Pennsylvania execpt to place ads in trade journals of nationwide circulation and to send Sterling some of its descriptive literature.

Finally, it owns no real or personal property and has no bank account of any kind in Pennsylvania. It maintains no office or employees here.

In this age of high-speed transportation and modern modes of communication, Pennsylvania retains a rather restrictive policy as to the amenability of non-registered foreign corporations to service of process. The courts of this state have interpreted the Business Corporation Law to require actual physical entry into the Commonwealth before the corporation is subject to its personal jurisdiction.

In the latest Opinion dealing with the issue, Cercere v. Ohringer Home Furniture Co., 208 Pa.Super. 138, 220 A.2d 350, April Term 1966, decided June 17, 1966, the Superior Court reluctantly sustained the preliminary objections of a non-registered foreign corporation to service of process. The corporation, Florence Art Company, had no office or property of any kind in the state, but it did have a sales representative who had solicited business for it as well as for several other concerns and who had greatly increased the sales of the corporation in Pennsylvania. This representative received compensation on a commission basis; paid his own taxes, social security, and health insurance; owned his own car for business; paid his own expenses; and operated out of his home. All sales he made were subject to the approval of the company. Otherwise, the company had no control over his activities or methods of operation.

While the court expressed its view that this company should be amenable to process, it concluded:

"* * * the test, in part, includes the `entry' into the Commonwealth by the foreign corporation by the physical presence of agents or property. Since the sales representative was not an agent but an independent contractor, and since Florence had no property in Pennsylvania, Florence was not doing business under that test."

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