Rocklin De Mexico, S. A. v. Superior Court

• Decision Date: 13 June 1984
• Citation: 203 Cal.Rptr. 547,157 Cal.App.3d 91
• Parties: ROCKLIN DE MEXICO, S.A., a Mexican corporation, Petitioner, v. The SUPERIOR COURT of Placer County, Respondent, ROCKLIN FOREST PRODUCTS, INC., and Rocklin Mouldings, Inc., both California corporations, Real Parties in Interest. Civ. 22610.
• Court: California Court of Appeals Court of Appeals

Page 547

203 Cal.Rptr. 547

157 Cal.App.3d 91

ROCKLIN DE MEXICO, S.A., a Mexican corporation, Petitioner, v. The SUPERIOR COURT of Placer County, Respondent, ROCKLIN FOREST PRODUCTS, INC., and Rocklin Mouldings, Inc., both California corporations, Real Parties in Interest.

Civ. 22610.

Court of Appeal, Third District, California.

June 13, 1984.

Certified for Partial Publication.

Hearing Denied Sept. 13, 1984.

Ash, Hutcherson & Hausauer and Lesley Ann Ash, San Diego, for petitioner.

No appearance for respondent.

McDonough, Holland & Allen, Harry E. Hull, Jr., and Janet Neeley Kvarme, Sacramento, for real parties in interest.

BLEASE, Associate Justice.

In this appeal we hold that, in the circumstances of this case, substantial purchases of California goods by an out-of-state buyer provide sufficient minimum contacts with the state to sustain its jurisdiction over the buyer in a suit for breach of the contracts of sale. ¹

Rocklin De Mexico (hereafter defendant) is a Mexican corporation which bought raw materials from a California supplier for use in its box manufacturing plant in Mexico. The purchases were effected by orders placed from outside the state. The California seller filed suit alleging defendant failed to pay for $70,000 worth of goods. This case comes to us on a timely petition for review of the trial court's denial of a

                motion to quash service of summons. 2  (See Code Civ.Proc., § 418.10, subd.  (c).)  We will deny the petition
                

FACTS

Defendant manufactures wooden crates and boxes at a factory in Mexicali, Mexico. Prior to May 1, 1981, Rocklin Mouldings, Inc., a California corporation, had an ownership interest in defendant. It is related by common ownership to Rocklin Forest Products, Inc., another California corporation, which is in the lumber business. During Rocklin Mouldings' tenure as an owner of defendant, Rocklin Forest Products, Inc. supplied the lumber used by defendant for its fabrication of boxes.

On May 1, 1981, Rocklin Mouldings sold its interest in defendant to Carlos Postlethwaite. Negotiations concerning the sale occurred in Mexico and in California. Prior to the sale, at the invitation of the joint president of Rocklin Mouldings and Rocklin Forest Products, Postlethwaite went to the Rocklin Forest Products plant in Roseville to see its operation and determine the availability of lumber for use in the box making business. Postlethwaite purchased defendant. Thereafter, between May 1, 1981, and November 1981, defendant ordered lumber almost weekly from Rocklin Forest Products. The lumber was ordered by telephone calls from Mexico and shipped from Roseville to Mexicali, Mexico. The underlying action arose when defendant failed to pay for $70,000 worth of lumber delivered to it.

DISCUSSION

I

California's "long-arm" statute extends the jurisdiction of California courts to the outermost boundaries of due process. "A court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States." (Code Civ.Proc., § 410.10; see Sibley v. Superior Court (1976) 16 Cal.3d 442, 445, 128 Cal.Rptr. 34, 546 P.2d 322.) "[D]ue process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' " (International Shoe Co. v. Washington (1945) 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95, 102; see also Shaffer v. Heitner (1977) 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 [in rem jurisdiction].)

The clarity of the law of jurisdiction has not improved since Judge Learned Hand observed: "It is quite impossible to establish any rule from the decided cases; we must step from tuft to tuft across the morass." (Hutchinson v. Chase & Gilbert (2d Cir.1930) 45 F.2d 139, 142.) The footing has become less sure because of the shift in constitutional analysis from "presence" to "minimum contacts". (See e.g. Lilly, Jurisdiction Over Domestic and Alien Defendants (1983) 69 Va.L.Rev. 85, 87-98; Mehren and Trautman, Jurisdiction to Adjudicate: A Suggested Analysis (1966) 79 Harv.L.Rev. 1121.) A further complication is the admixture of considerations of forum non conveniens. (See e.g. Cornelison v. Chaney (1976) 16 Cal.3d 143, 150-152, 127 Cal.Rptr. 352, 545 P.2d 264.) Although the cases do not articulate a formula for evaluating contacts relevant to fair play and substantial justice, they do set forth criteria, embedded in paradigmatic conduct, by which to measure their sufficiency. (See Brilmayer, How Contacts Count: Due Process Limitations On State Court Jurisdiction, 1980 Sup.Ct.Rev. 77.) Henry R. Jahn & Son v. Superior Court (1958) 49 Cal.2d 855, 323 P.2d 437 provides the criteria applicable to this case.

In Jahn, a corporate New York exporter purchased grain drying equipment over a two-year period from the California plaintiff, pursuant to an exclusive contract, for resale through distributors in South and Central America. The exporter shifted his contractual allegiance to a California partnership which sought to take over plaintiff's markets. Plaintiff alleged the exporter and his new suppliers induced breaches of its contracts with the South and Central American distributors, using confidential information to compete unfairly. (Id., 49 Cal.2d at pp. 857-858, 323 P.2d 437.) At issue was whether the ongoing purchasing conduct constituted "doing business" in California, making the foreign corporation amenable to substituted service of process. (Former Corp.Code, § 6501.) "Doing business" was a term used by the courts to mean contacts sufficient to satisfy due process. (Id., at p. 858, 323 P.2d 437)

Jahn held that regular purchasing activity in the forum state can provide jurisdictional contacts compatible with fair play and substantial justice. "Under the minimum contacts test of the International Shoe case regular sales solicitation alone can constitute doing business rendering the foreign corporation amenable to process in actions engendered by such activities.... [citations]. Since there is no distinction for jurisdictional purposes between regular selling and regular buying [citations] ... jurisdiction [may be maintained] on the basis of the defendant's purchasing activities in the state." (Id., at p. 859, 323 P.2d 437, emphasis added.)

Jahn emphasized these facts: "Jahn made regular purchases from plaintiff as its exclusive export agent. It took title to the goods in this state. It directed its agent how and where to ship them. Even after it ceased doing business with plaintiff, it entered into a similar course of business dealings with defendant partnership. It reaped the benefits of our laws that protected its goods while they were here, and it had access to our courts to enforce any rights in regard to these transactions. The alleged cause of action grew directly out of Jahn's relationship with plaintiff and the partnership in this state." (Id., at p. 861, 323 P.2d 437.) ³

Jahn's broad teaching that purchasing activity may suffice for jurisdiction has been obscured in subsequent appellate decisions. ⁴ Tiffany Records, Inc. v. M.B. Krupp Distributors, Inc. (1969) 276 Cal.App.2d 610, 81 Cal.Rptr. 320, upon which the defendant relies, is the point of departure. it distinguished Jahn on the facts; Jahn was the exclusive distributor of plaintiff's products; the contract had been created in California; Jahn had twice sent its auditors to California to monitor compliance with the purchase orders. (See Id., at p. 616, 81 Cal.Rptr. 320.) The court emphasized the purchasing activities were wholly out of state and lacked "that quality and nature of activity that would make it 'fair' to require any respondent to defend itself [in California]." (Id., at p. 619, 81 Cal.Rptr. 320.) ⁵

Tiffany Records served as authority in subsequent decisions for an implicit rejection of Jahn's broad teaching. ⁶ (See Belmont Industries, Inc. v. Superior Court (1973) 31 Cal.App.3d 281, 287-288, 107 Cal.Rptr. 237; Cornell University Medical College v. Superior Court (1974) 38 Cal.App.3d 311, 316-318, 113 Cal.Rptr. 291; cf. Floyd J. Harkness Co., Inc. v. Amezcua (1976) 60 Cal.App.3d 687, 692-694, 131 Cal.Rptr. 667.) These cases advance two claims which run counter to Jahn. They say that regular purchases in the forum state carry no jurisdictional weight because they do not constitute conduct by the purchaser in California. (See Belmont, supra, 31 Cal.App.3d at p. 288, 107 Cal.Rptr. 237; Cornell, supra, 38 Cal.App.3d at p. 316, 113 Cal.Rptr. 291; Harkness, supra, 60 Cal.App.3d at p. 691, 131 Cal.Rptr. 667.) They also say it is advantageous to California's merchants to decline jurisdiction because it would encourage out-of-state purchasers to do business here. (See e.g. Belmont, supra, 31 Cal.App.3d at p. 289, 107 Cal.Rptr. 237.) Neither of these propositions has merit.

The latter point is irrelevant. It was squarely posed by the dissent in Jahn and was impliedly rejected. (See Id., 49 Cal.2d at p. 863, 323 P.2d 437, (dis. opn. of Schauer, J.).) It does not address the "fairness" of holding a defendant to answer in the forum state, which is the bedrock of due process. Rather it makes a policy choice between competing interests of California's merchants, a consideration outside the constitutional concerns of the "long arm" statute.

The mainstay of Belmont's contradiction of Jahn is the claim that "[plaintiff's] performance in California cannot give jurisdiction over [defendant]; it is [defendant's] activity that must provide the basis for jurisdiction." (Id., 31 Cal.App.3d at p. 288, 107 Cal.Rptr. 237; see also Cornell, supra, 38 Cal.App.3d at p. 316, 113 Cal.Rptr. 291; Harkness, supra, 60 Cal.App.3d at p. 691, 131 Cal.Rptr. 667.) This claim is rebuffed by Jahn and other authorities. ⁷ It disinters the moribund doctrine that "presen...