Seven Provinces Ins. Co. v. Commerce & Indus. Ins. Co.

• Decision Date: 13 October 1969
• Docket Number: Civ. A. No. 16744-3.
• Citation: 306 F. Supp. 259
• Court: U.S. District Court — Western District of Missouri
• Parties: The SEVEN PROVINCES INSURANCE COMPANY, Ltd., Plaintiff, v. COMMERCE & INDUSTRY INSURANCE COMPANY, Defendant.

306 F. Supp. 259

The SEVEN PROVINCES INSURANCE COMPANY, Ltd., Plaintiff, v. COMMERCE & INDUSTRY INSURANCE COMPANY, Defendant.

Civ. A. No. 16744-3.

United States District Court W. D. Missouri, W. D.

October 13, 1969.

George M. Winger, Kansas City, Mo., of Smith, Schwegler, Swartzman & Winger, for plaintiff.

Thomas J. Leittem, Kansas City, Mo., of Shughart, Thomson & Kilroy, for defendant.

ORDER DENYING DEFENDANT'S MOTION TO DISMISS

BECKER, Chief Judge.

In this case, an alleged reinsurance contract on the S. S. "Aktor" is claimed by plaintiff to have been accepted by defendant, not within the State of Missouri. The S. S. "Aktor" sank while sailing in the Pacific Ocean. Plaintiff is not a citizen of Missouri and does not claim that the reinsurance contract was issued in the State of Missouri nor that the loss occurred here, but plaintiff nevertheless has sued upon the contract in this Court after obtaining service on defendant's agent in this state.

Defendant has moved to dismiss plaintiff's complaint, to quash return of service on it, and alternatively to transfer this cause to the Northern District of California in San Francisco under the doctrine of forum non conveniens as provided in Section 1404(a), Title 28, U.S.C.

Service has been had upon Henry Burr, Registered Agent for T. H. Mastin & Co., on June 6, 1968, and defendant agrees that, since Burr was a proper agent of defendant on that date, service on him was proper service on the defendant, if the latter was "amenable to service" in Missouri.¹

Service was had under Rule 4(d) (3), F.R.Civ.P., which provides for service:

"Upon a domestic or foreign corporation or upon a partnership or other unincorporated association which is subject to suit under a common name, by delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process and, if the agent is one authorized by statute to receive service and the statute so requires, by also mailing a copy to the defendant."

The defendant contends that the words "law" and "statute" as used in the quoted part of the rule refer to state law and statute; that the only Missouri law or statute under which defendant could have been served and therefore the only possible state statutory reference of Rule 4(d) (3) is Section 375.906 of the Missouri Revised Statutes, V.A.M.S., which permits service upon the Superintendent of the Division of Insurance of Missouri when the defendant is an insurance company not incorporated or organized under the laws of Missouri, and does not have its principal place of business in Missouri; and that such service is permissible only if the action is brought upon a policy issued in Missouri in which the nonresident is a beneficiary or assignee or if the cause of action is one which arises out of business transacted, acts done, or contracts made in Missouri.²

The defendant therefore contends that, while the manner of service is admittedly controlled by Rule 4(d) (3), F.R.Civ.P., amenability to service is nevertheless subject to state law, which in this case permits service only under Section 375.906; and that service was not had in the case at bar pursuant to Section 375.906.

It is undisputed that the method of service is controlled by Rule 4(d) (3), F.R.Civ.P. Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8. The rule of that case is that the propriety of the method of service must be controlled by the Federal Rules of Civil Procedure, even though the method used does not conform to the method used in the state courts. See also 1A Moore's Federal Practice ¶ 0.317 5, pp. 3535-3536, where it is said:

"However, Rule 4(d) (3) authorizes service upon a foreign corporation in the manner there stated and does not refer to state law. It is quite true that a state may decide not to extend its jurisdiction to the limits which the constitution allows. Federal courts, therefore, hearing non-federal cases may possibly exercise jurisdiction over foreign corporations when the courts of the state in which the federal court is sitting would not. Some federal courts have suggested that obtaining jurisdiction over a defendant is a matter falling under the Erie Doctrine and therefore they have looked to the law of the state in which the court is sitting, when hearing a non-federal matter, to see whether the state court would exercise jurisdiction. This view disregards Rule 4(d) (3) and looks only to Rule 4(d) (7) and, in our opinion, is not sound."

Defendant, however, contends, in substance, that the proper rule is the one condemned by Professor Moore as "not sound". Defendant's reasoning is (1) that Missouri state courts have held that Section 375.906 R.S.Mo. 1967 (as well as Section 375.210 R.S.Mo. 1949, its predecessor) "prescribes the exclusive method for service of process on foreign insurance companies licensed to transact business in Missouri," Johnson v. Fire Ass'n of Philadelphia, 240 Mo.App. 1187, 225 S.W.2d 370, 371, and cases therein cited, (2) that, therefore, although Rule 4(d) (3) may properly extend the methods of service used in the federal courts beyond those used in the state courts, still "a federal court sitting in diversity in Missouri must look to Missouri standards in determining whether it has jurisdiction over a foreign insurance company in Missouri;"³ and (3) that, since the method of service prescribed by Missouri would not allow service on the defendant, therefore the Missouri state courts would never take jurisdiction over a defendant in a case like the one at bar. In the light of the Supreme Court decision in Hanna v. Plumer, supra, that reasoning is unsound, being in essence that no service could be obtained under the Missouri statute; therefore the federal court could never obtain jurisdiction over the defendant because it could not obtain jurisdiction, as Missouri would have prescribed, by the method of the Missouri statute. Such reasoning would completely nullify the independent federal control that Rule 4(d) (3) has and would necessarily restrict methods of service used by the federal courts in diversity cases to those used by the state. It is not reasonable, particularly in view of Professor Moore's perceptive commentary and the decision in Hanna v. Plumer, supra, to give the rule such a construction.⁴

To state that the method of service need not be restricted to that exclusively authorized by the state court, however, is not to state that the general principle of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, is no longer to be followed in diversity cases. The Eighth Circuit cases of Jennings v. McCall Corp. (C.A. 8, 1963) 320 F.2d 64, and Simpkins v. Council Mfg. Corp. (C.A. 8, 1964) 332 F.2d 733, therefore may, as defendant urges, survive the Hanna decision with their rule that the case cannot be entertained by the federal court if it would not be entertained by the Missouri courts for lack of state court jurisdiction over the corporate defendant. Thus, in both Jennings and Simpkins, the corporate defendant was held not to be subject to service under the state law because they were not "doing business" in Missouri in the manner which Missouri courts then required for jurisdiction over the corporate defendant. As the court stated in Jennings:

"If minimum federal due process standards are met, state law is controlling upon what constitutes doing business for the purpose of conferring personal jurisdiction in the state courts."

Even under the rule of the Jennings case, however, the defendant in this case meets the test of a foreign corporation "doing business" through an agent or agents in the State of Missouri, in that it transacted business generally for a substantial period of time in Missouri, although not in respect to the contract out of which this claim arose.⁵ Defendant's position that it is not doing business in Missouri, in the absence of a showing to that effect,⁶ must be predicated upon the contention that the claim for relief must arise out of the doing of business by the foreign corporation in Missouri. It is true that Missouri courts until recently refused to exercise state court jurisdiction in any other case. That, however, was never an absolute requirement of the letter of the decisions, but merely one of the elements to be considered in determining whether the corporation did business in Missouri. As the court noted in Jennings:

"Such cases⁷ and the authorities heretofore cited support the trial court's view that the origin of a cause of action is an important factor to consider in determining for state jurisdictional purposes whether the foreign corporation was doing business in the state." 320 F.2d at 72.

The only argument under the Jennings and Simpkins principles which, if sound, would prevent the obtaining of personal jurisdiction over the defendant in the case at bar is the alleged requirement that service could be had on the defendant only under Section 375.906, and not under Missouri Civil Rules 54.06(c) and 54.20, V.A.M.R. It is clear, however, as has been noted, that Hanna v. Plumer, supra, would not restrict the method of service to that required by the Missouri statute. If the service, judged in the light of federal standards, is effective, the only remaining question is whether the Missouri courts would take jurisdiction of a case such as the one at bar. In the absence of a restriction on method of service in Missouri, the foreign corporation (insurance company or otherwise) is amenable to service and subject to state court jurisdiction if it comes within the operation of Missouri statutes, rules, decisions or practices otherwise applicable. Otherwise, Missouri courts have not shown any special reluctance to accept jurisdiction of transitory claims for relief when neither plaintiff nor defendant were citizens of Missouri and the cause of action did not arise in Missouri. See ...