Shern v. Tractor Supply Company of Grand Forks

• Court: U.S. District Court — District of South Dakota
• Writing for the Court: BENSON
• Citation: Shern v. Tractor Supply Company of Grand Forks, 381 F.Supp. 1331 (D. S.D. 1974)
• Decision Date: 01 October 1974
• Docket Number: Civ. No. A2-74-66.
• Parties: Gerald SHERN, Plaintiff, v. TRACTOR SUPPLY COMPANY OF GRAND FORKS, et al., Defendants.

381 F. Supp. 1331

Gerald SHERN, Plaintiff, v. TRACTOR SUPPLY COMPANY OF GRAND FORKS, et al., Defendants.

Civ. No. A2-74-66.

United States District Court, D. North Dakota, Northeastern Division.

October 1, 1974.

Gerald J. Haga, Degnan, McElroy, Lamb, Camrud & Maddock, Ltd., Grand Forks, N. D., for plaintiff.

H. Patrick Weir, Vogel, Vogel, Brantner & Kelly, Fargo, N. D., for Tractor Supply & TSC Industries, Inc.

Timothy Q. Davies, Nilles, Hansen, Selbo, Magill & Davies, Ltd., Fargo, N. D., for American President Lines.

MEMORANDUM AND ORDER

BENSON, Chief Judge.

This action arises out of the entry by plaintiff into a contest sponsored and promoted by Defendant Tractor Supply Company (TSC) of Grand Forks, Inc. The contest, according to the complaint, was contained in an advertising supplement which read in part:

"Win! A glamorous three month cruise on the S. S. President Wilson. See Bombay, Hong Kong, Honolulu and more. Register now! Nothing to buy . . ."

The plaintiff alleges that in reliance upon the representations of the defendants, he registered at the TSC store in Grand Forks, and was subsequently notified in late November, 1972, that he had won the contest and was thus entitled to a "round-the-world cruise aboard the S. S. President Wilson", a vessel owned by Defendant American President Lines (American). Plaintiff states he was officially notified of his success by letter on December 15, 1972, but that he had only until January 4 or January 5 of 1973, to prepare for the cruise. Plaintiff advised defendants that he could not arrange his personal affairs in such a short time, and alleges that, in response, "defendants thereafter failed to offer a fair, reasonable or legitimate alternative to such cruise, substituting so-called cruises for much shorter time spans on cargo ships, all of which said cargo ships did not cruise the world but only the Pacific". Plaintiff bases his action on the breach of a contract allegedly existing between plaintiff and defendants, which was sealed by the act of plaintiff entering into the contest.

Jurisdiction is grounded on diversity, plaintiff being a citizen of Minnesota; Defendants TSC of Grand Forks and TSC Industries, Inc., being Delaware corporations with their principal place of business at Chicago; Defendant American President Lines, a Delaware corporation, having its principal place of business in San Francisco; and the amount in controversy exceeding $10,000.00.

Defendant American President Lines, has moved to dismiss the action on the grounds that defendant "has maintained no contacts with the State of North Dakota sufficient to constitute `doing business' under any meaningful view of that phrase." Defendant states by affidavit that it does not, and has never, owned property within the state, does not, and has never, maintained an office therein; has not solicited business in the state, nor entered into a contract with, or otherwise employed, any agent or any independent contractor to do so; transports no goods in the state; has not advertised within the state in any locally published publication; has not offered its stock for sale within the state, and has never conducted any meetings of its Board of Directors or Executive Committee within the state.

Plaintiff counters with the following contacts:

1. It is asserted that the contest was sponsored and promoted not only by Tractor Supply Company but also by American, as the company's name appears prominently on the advertising supplement notifying the public of the contest. Whether American President Lines sponsored and promoted the contest is open to dispute, it appearing that TSC were the sponsors and promoters of the contest, the Line merely being the means of accomplishing the awarding of the prize. However, it can be stated the appearance of the company's name on the supplement constituted advertising, as is conceded by American. The answer of TSC states that they "entered into a promotional agreement whereby TSC Industries, Inc. and American were to exchange cooperative advertising".

2. Plaintiff also asserts that the alleged contract between plaintiff and American, the subject matter of this law suit, was sealed by plaintiff entering into the contest in North Dakota.

3. A possible third contact appears in American's affidavit to the effect that the company "may possibly have contacted travel agents residing within the state by mail, and may possibly have contacted by mail, members of the Company's Seamaster's Club (which consists of former passengers who have joined the club) residing in North Dakota.

4. Finally, some mention must be made of communications on negotiations purportedly made between defendants and plaintiff concerning the contest prize. Plaintiff's complaint alleges that plaintiff was notified by letter and telephone of winning the contest, and several communications between the defendants and plaintiff followed. Any negotiations concerning the contest between plaintiff and American must have been totally without the State of North Dakota. For the purposes of passing on the motion herein, this Court will assume that the alleged contract was consummated in North Dakota, that American was promoting its services in North Dakota, by advertising in connection with the contest, that American has distributed informational material to travel agents in North Dakota concerning its recreational product, and that American has communicated with members of its Seamaster's Club, who reside in North Dakota, by mail. The question, given these assumptions, is whether American has sufficient contact with the State of North Dakota, under the due process clause of the Fourteenth Amendment, and the applicable North Dakota long-arm statute, for this Court to exercise jurisdiction over American.

American's reliance upon a "doing business" criteria as a showing that plaintiff must make in order for this Court to assert jurisdiction is outdated. No longer is it necessary to show that a corporation is "doing business" in the state in the sense that American uses the phrase; namely, "some sort of continuity of conduct indicating a corporate intent to conduct a continuous business". Until 1969, this was the criteria in North Dakota. However, the state's long-arm statute has since been expanded twice. N.D.C.C. § 28-06.1-02 (1969); Rule 4(b) (2), North Dakota Rules of Civil Procedure, adopted by the North Dakota Supreme Court on June 28, 1971. Rule 4(b)(2), as applicable to this case, reads:

"(2) Personal jurisdiction based on contacts. — A court of this state may exercise personal jurisdiction over a person who acts directly or by an agent as to any claim for relief arising from the person's

(A) transacting any business in this state;

(B) contracting to supply or supplying services, goods, or other things in this state. . . ."

After a detailed analysis of the relevant North Dakota cases and the language of the act itself, this Court, in Vasquez v. Falcon Coach Co., Inc., 376 F.Supp. 815 (D.N.D. filed, 1974), concluded:

"It appears that the Supreme Court of North Dakota considers these enactments to bring North Dakota in line with other jurisdictions which permit service of process on foreign corporations to the fullest extent possible within due process limits. . . .

In conclusion, the language of Rule 4(b)(2)(B) reflects the breadth of its application. The rule is couched in terms of `contacts' and not in terms of `doing business'. It is also noteworthy that a contract with the aggrieved person is not necessary to base service upon a foreign corporation; rather the act authorizes `jurisdiction over a person who acts directly or by an agent as to any claim for relief arising from the person's . . . supplying services, goods, or other things in this state. This court has previously given Rule 4(b)(2) an expansive construction in Keller v. Clark Equipment Company, 367 F.Supp. 1350 (D.N.D.1973), where service upon a foreign corporation was sustained upon a single contract between the parties." at 11, 12 of opinion.

Plaintiff is correct in referring to the North Dakota statute as a "single act" statute whereby, consistent with due process standards, a single tortious act or a single contract may constitute a sufficient contact with a state upon which its courts can base jurisdiction over the party committing the tort. However, plaintiff's suggestion that the mere consummation of a contract in the forum state, without more, is a sufficient contact upon which to base jurisdiction under Rule 4(b)(2) is misplaced. In Keller v. Clark Equipment Company, 367 F.Supp. 1350 (D.N.D.1973), this Court considered the sufficiency of manufacturing licensing agreements between the plaintiffs, North Dakota residents, and Clark A.G., the parent company of Clark Equipment Company. In Keller, this Court held that plaintiff must show something more than the making of a contract in North Dakota to satisfy the dictates of Due Process and Rule 4(b) (2).

"Although the United States Supreme Court has not yet determined whether a single contract is a sufficient basis for jurisdiction, in the case of McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957), the court did sustain state jurisdiction on the basis of a single insurance contract.

The facts of the specific case will often be determinative of whether the single act or contract will serve as a viable basis for jurisdiction. Bonhiver v. Louisiana Brokers Exch. Inc., 255 F.Supp. 254 (D.Minn.1966). In this view, the North Dakota Supreme Court has said that whether a foreign corporation is doing business in the state so as to be subject to service of process hinges on the facts of the case. Fisher v. Mon Dak Truck Lines, Inc., 166 N.W.2d 371 (N.D. 1969).

Rule 4(b) (2) of the North Dakota Rules of Civil Procedure provides for personal jurisdiction over any person who transacts `any business' in the state. This is typical of `single act' statutes which

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