Schering Transamerica Corporation v. Torres-Canet, Civ. No. 542-66.
| Decision Date | 30 September 1968 |
| Docket Number | Civ. No. 542-66. |
| Citation | 290 F. Supp. 362 |
| Parties | SCHERING TRANSAMERICA CORPORATION, Plaintiff, v. Wallace TORRES-CANET, Defendant, v. SUTTON COSMETICS et al., Third-Party Defendants. |
| Court | U.S. District Court — District of Puerto Rico |
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McConnell, Valdes, Kelley & Sifre, San Juan, P. R., for plaintiff.
Nachman, Feldstein, Laffitte & Smith, San Juan, P. R., for defendant.
Brown, Newson & Cordova, San Juan, P. R., for third-party defendants.
This cause came to be heard upon the motion of the third-party defendants for dismissal of the third-party complaint or in lieu thereof to quash the returns of services of summons on the grounds that this Court has no jurisdiction so as to subject the third-party defendants to service of process within the District of Puerto Rico.1
Plaintiff filed this action against defendant seeking judgment for goods sold and delivered to the defendant and allegedly not paid for. Plaintiff also seeks a declaratory judgment that it could terminate all relationship with defendant as a distributor of its cosmetics products for just cause.
In its answer defendant denied liability and counterclaimed seeking damages from the plaintiff for the plaintiff's alleged violation of Law No. 75 approved by the Legislature of Puerto Rico, on June 24, 1964, as amended, 10 L.P.R.A. §§ 278-278d.
Some six months later plaintiff brought a third-party complaint against Sutton Cosmetics, Inc., Michael D. Goldsmith and Henry Worth alleging that insofar as the defendant may recover money from the plaintiff for the plaintiff's cancellation of defendant's distributorship, plaintiff should in that event be indemnified by the third-party defendants. Plaintiff's claim of a right to indemnification by the third-party defendants is founded on a contract and two letter-agreements.
Before December of 1964, Sutton Cosmetics, Inc. was engaged in the cosmetics business, selling its products primarily in the United States and also in various other parts of the world. A small fraction of its sales were made to persons in the Commonwealth of Puerto Rico. Sutton was a New York corporation and had its only office in New York City.
On December 24, 1964, Sutton executed an agreement in which it sold all of its assets to White Laboratories, Inc. This agreement was negotiated in its entirety in New York and New Jersey. Sutton's sole assets were located in New York and New Jersey and all were transferred in New York and New Jersey. Paragraph 9 of the agreement said that it would be governed "by the laws of the State of New York."
In the agreement, Sutton represented to White Laboratories, Inc. that it had no distributorship agreements (with certain exceptions) which could not be cancelled upon thirty (30) days' notice by Sutton. Among those persons listed as not having a distributorship agreement that could not be so cancelled was defendant Torres-Canet.
In separate letters executed in New York, Worth and Goldsmith endorsed all the representations made by Sutton to White Laboratories, Inc.
Since January 15, 1965, Sutton has engaged in no business whatsoever in the Commonwealth of Puerto Rico or with citizens or residents of Puerto Rico. Indeed, except for winding up its affairs, it did no business from the aforesaid date until it became absolutely defunct in December of 1965.
For their part, neither Worth nor Goldsmith ever did any business for their personal accounts in Puerto Rico. Neither Sutton, Goldsmith nor Worth ever had an office in Puerto Rico.
Plaintiff Schering claims to be the successor to White Laboratories, Inc. under the Sutton Agreement. It appears from the pleadings that, by its own choice, Schering did business with defendant Torres-Canet after January 15, 1965, for a year and one-half. Sutton, Worth and Goldsmith never participated as parties in any business arrangements involving Schering and Torres-Canet.
Service of process was attempted to be made upon the three third party defendants by service upon the Secretary of State of the Commonwealth of Puerto Rico under Rule 4.7 of the Rules of Civil Procedure of Puerto Rico and under Title 14 Section 2207 of the Laws of Puerto Rico Annotated.
Affidavits were submitted and depositions were taken. Upon consideration of the pleadings and documents on file this Court finds that there exists no genuine issue of fact relative to jurisdiction over the third-party defendants and Court makes the following:
FINDINGS OF FACT
1. The contract which is the alleged basis of the third-party complaint was made in the State of New York between New York domiciliaries and a New Jersey corporation and no portion of said contract or the negotiations in connection therewith took place in the Commonwealth of Puerto Rico.
2. The subject matter of the said contract was located wholly in New York and the assets and properties covered thereby were situated in New York and no part thereof was ever in the Commonwealth of Puerto Rico.
3. No part of the said contract was to be performed by any of the parties thereto in the Commonwealth of Puerto Rico.
4. None of the said third-party defendants made any contracts or committed any torts within the Commonwealth of Puerto Rico which would give rise to the cause of action purported to be alleged in the third-party complaint.
5. None of the third-party defendants owned any property, possessed assets, employed employees, maintained offices, or had bank accounts in the Commonwealth of Puerto Rico.
6. The corporate third-party defendant Sutton Cosmetics, Inc. having been legally dissolved in 1965 could not have had any dealings in the District of Puerto Rico at a time proximate to the commencement of this action and so could not be a person who at the time of the commencement of the action was carrying out business transactions within Puerto Rico.
1. There is no "in personam" jurisdiction over the third-party defendants because the third-party complaint does not arise from a transaction of business in the Commonwealth of Puerto Rico. The attempted service of the third-party complaint fails here because it does not satisfy the plain terms of the Puerto Rican "long-arm statute" which requires that a claim be founded on transactions occurring within the Commonwealth of Puerto Rico. As with most other "long-arm statutes", Rule 4.7 of the Rules of Civil Procedure of the Commonwealth of Puerto Rico provides that personal jurisdiction can be obtained if the claim arises as a result of a person carrying out business transactions within Puerto Rico, but the third-party complaint does not arise from transactions carried out by the third-party defendants in Puerto Rico, but from a transaction carried out in New York and New Jersey. The third-party plaintiff's complaint is based on an alleged breach of contract by the third-party defendants, and as such, this claim arises from said contract. The execution of the contract was the transaction of business. In interpreting the New York State "long arm statute", which is quite similar to that of the Commonwealth of Puerto Rico, the Federal Courts have held that to make and negotiate a contract is to "transact business" within the meaning of the statute. See Oil & Gas Ventures-First 1958 Fund Ltd. v. Kung, 250 F.Supp. 744 (S.D.N.Y.1966) (Weinfeld, J.); Chankalian v. Aerovías Quisqueyana, C. por A., S.D.N.Y., 67 Civ. 1347, Opinion July 31, 1967 (Frankel, J.)
But the agreement which is the basis of the third-party complaint was negotiated in New York and New Jersey. Transactions that Sutton Cosmetics, one of the third-party defendants, had with the defendant years back are not the basis of the claim against the third-party defendants; the third-party complaint springs from the New York-New Jersey contracts. The basis for the third-party plaintiff's claim is not any transaction between the third-party defendants and the defendant, but transactions negotiated and made in New York and New Jersey between third-party defendants and plaintiff. That there may be consequences affecting other persons in other jurisdictions, or that through a chain of events, one could say that transactions in the past in one jurisdiction led to the transaction giving rise to the cause of action, is not the test at all. There is no notion here of proximate causation in these statutes. See Agrashell, Inc. v. Bernard Sirotta Company, 344 F.2d 583 (2d Cir. 1965); United States v. Montreal Trust Company, 235 F.Supp. 345 (S.D.N.Y.1964) (McLean, J.)
A state does not acquire personal jurisdiction merely by being the center of gravity of the controversy or the most convenient location of litigation; more is required to sustain "in personam" jurisdiction. A plaintiff is required to establish that the proposed defendants transacted business within the geographical limits of the Court's jurisdiction, and that the cause of action being sued upon arose out of the business so transacted. Goldstein v. Compudyne Corp., 262 F.Supp. 524, 526, 527 (D.C.).
In the case at bar, the acts which plaintiff claims were instances of transacting business are remote and are not claimed to have given rise to the cause of action alleged in the third-party complaint.
The doctrine of fair play requires that prospective defendants not only have minimum contacts in the jurisdiction but that those contacts be meaningful and have relevance to the cause of action asserted.
Moreover, even if plaintiff could go back to the defendant's claim and not rely on its own, it could not succeed. The defendant's counterclaims are not founded on anything the third-party defendants did, but allegedly what plaintiff did. Defendant uses his former dealings with Sutton Cosmetics only to indicate a measure of damages against plaintiff as granted by Law 75, supra. Defendant does not claim that Sutton Cosmetics could not have cancelled whatever arrangement it had with...
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