Snyder v. Hampton Industries, Inc., Civ. A. No. M-81-348.

• Court: United States District Courts. 4th Circuit. United States District Court (Maryland)
• Citation: 521 F. Supp. 130
• Docket Number: Civ. A. No. M-81-348.
• Parties: Paul SNYDER and Mens and Boys Apparel Mart, Inc. v. HAMPTON INDUSTRIES, INC.
• Decision Date: 31 July 1981

521 F. Supp. 130

Paul SNYDER and Mens and Boys Apparel Mart, Inc.
v.
HAMPTON INDUSTRIES, INC.

Civ. A. No. M-81-348.

United States District Court, D. Maryland.

July 31, 1981.

521 F. Supp. 131

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521 F. Supp. 132

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521 F. Supp. 133

George W. Liebmann and Stephen L. Snyder, Baltimore, Md., for plaintiffs

Robert G. Levy, John M. Belferman, and Frank, Bernstein, Conaway & Goldman, Baltimore, Md., for defendant.

MEMORANDUM AND ORDER

JAMES R. MILLER, Jr., District Judge.

This case is presently before the court on the defendant's motion to dismiss for lack of personal jurisdiction and improper venue, Rule 12(b)(2) and (3), Fed.R.Civ.P., or in the alternative, for transfer to the United States District Court for the Eastern District of North Carolina.¹ The plaintiffs have filed a response opposing the defendant's motion,² and the defendant has filed a reply to the plaintiffs' response and a supplemental memorandum.³ The court having heard argument by counsel on July 17, 1981, the above-listed motions are now ready for disposition. Since the defendant's motion under Rule 12(b)(2) raises important questions concerning the statutory and constitutional limitations of Maryland's long arm statute, Md. Cts. & Jud.Proc.Code Ann. § 6-103 (1980 Rep.Vol.), the background of this case will be set out in some detail.

I. Background

The plaintiffs, Paul Snyder and Mens and Boys Apparel Mart, Inc., brought this breach of contract action against the defendant, Hampton Industries, Inc., in February of 1981. Service of the summons and complaint was made upon Hampton by a private process server in North Carolina, pursuant to Rule 107, Maryland Rules of Procedure. See Local Rule 25. In Count I of the complaint, the plaintiffs allege that Hampton has breached a contract between the parties by failing to pay commissions earned by the plaintiffs, and by failing to abide by its delivery obligations regarding the shipment of goods to customers whose purchase orders were obtained by the plaintiffs. Count I also charges Hampton with fraudulently concealing the nonpayment of commissions, and with exercising duress upon plaintiff Snyder to forestall his taking legal action. In Count II, Hampton is alleged to have breached a settlement agreement entered into by the parties in Pennsylvania regarding the nonpayment of the commissions. Subject matter jurisdiction is alleged under 28 U.S.C. § 1332(a).

Snyder, a citizen of Maryland, is the president of Mens and Boys Apparel Mart, Inc., a Maryland corporation that has its principal place of business in Baltimore City. Hampton is incorporated under the laws of North Carolina, and alleges that its principal place of business is Kinston, North Carolina, although it has a sales office in New York City. Hampco Apparel, Inc., a wholly-owned subsidiary of Hampton, is incorporated in and licensed to do business in Maryland.⁴ Hampco has not been named as a defendant in this action.

521 F. Supp. 134

The plaintiffs allege that the relationship between the parties began in 1951. On February 13, 1951, the plaintiffs entered into a written selling agency agreement with Samsons, Inc., the corporate predecessor of the defendant.⁵ Under that agreement, the plaintiffs were appointed a "selling agency" and the "exclusive representative" of Samsons' clothing lines in Maryland, Delaware, Pennsylvania, the District of Columbia, and Northern Virginia.⁶ In Addition, Samsons agreed to furnish the plaintiffs with certain documents pertaining to the accounts in the selling area, and to "deliver 90% of all accepted orders."

Hampton admits that Samsons was its corporate predecessor, but asserts that the written agreement was terminated in 1967. Hampton concedes, however, that it maintained a business relationship with the plaintiffs on a "verbal basis," and continued to pay commissions on orders solicited from Maryland customers. The plaintiffs contend that only the commission rate aspect of the 1951 agreement has been modified. According to the plaintiffs, the parties continued to operate under all of the other terms set out in the written agreement.

The exact nature of the parties' relationship is not entirely clear. Based on the affidavits and other materials submitted by the parties, however, the basic outline of their dealings appears to be as follows. The plaintiffs solicit purchase orders from customer accounts in Maryland and the other states within the selling territory for Hampton products, including the Hampco lines. Customer orders are recorded on special purchase order forms supplied to the plaintiffs by Hampton. The plaintiffs allege that such activity has been continuous since 1951, and that the value of the orders obtained from Maryland customers in the last calendar year exceeded one million dollars.

The purchase orders obtained by the plaintiffs are forwarded to Hampton's office in New York City. The New York City office then sends the purchase orders to Hampton's office in Kinston, North Carolina. When the purchase orders are approved, they are entered into a computer according to the plaintiffs' sales representative number. The computer prepares a printout of all of the orders when the goods are shipped and invoiced to the customers. Hampton alleges that its sales contracts with the account customers provide that the goods are to be shipped by common carrier, either F.O.B. Kinston or Snow Hill, North Carolina, or F.O.B. Martinsville, Virginia. Commissions paid by Hampton to the plaintiffs are based on actual shipments of goods to the account customers. Payment of commissions is by mail, with Hampton's check drawn on either a North Carolina or a New York bank.

With respect to Hampton's Maryland "contacts," the affidavit of Sol Schechter, its president,⁷ states that: (1) Hampton has never been licensed to do business in Maryland; (2) Hampton maintains no bank accounts or other assets in Maryland; (3) Hampton has never had an office, place of business, or a telephone listing in Maryland; (4) Hampton has never had agents, servants, or employees in Maryland; (5) all meetings with the plaintiffs were held outside of Maryland; (6) the plaintiffs have never entered into any contract with Hampco; and (7) neither of the plaintiffs has ever had the authority to enter into contracts with the account customers on behalf of Hampton. Hampton further contends that the plaintiffs are independent contractors, and that all purchase orders obtained by them must be approved by Hampton at its office in Kinston, North Carolina. The invoices for merchandise

521 F. Supp. 135

sold by Hampton to the account customers are issued in North Carolina, and the customers mail their payments either directly to Hampton's North Carolina office, or to a "lock box" in Pennsylvania

According to the plaintiffs, Hampton sends them prepared promotional literature for distribution to Hampton's customers within the plaintiffs' selling area, and authorized the plaintiffs to list Hampton and Hampco in the Baltimore City business telephone directory as having an office at the plaintiffs' place of business in Baltimore City. The plaintiffs also note that Hampton corresponds directly with Maryland customers regarding the purchase orders obtained by the plaintiffs, and that Hampton's 1979 and 1980 annual reports state that Hampton maintains "regional sales offices" in several cities, including Baltimore. The promotional literature supplied to the plaintiffs by Hampton also lists the plaintiffs' place of business in Baltimore as a Hampton "showroom."

II. Personal Jurisdiction

The Maryland long arm statute defines the circumstances under which Maryland courts may exercise personal jurisdiction over nonresident defendants. It provides as follows:

"(a) Condition — If jurisdiction over a person is based solely upon this section, he may be sued only on a cause of action arising from any act enumerated in this section.

(b) In general — A court may exercise personal jurisdiction over a person, who directly or by an agent:

(1) Transacts any business or performs any character of work or service in the State;

(2) Contracts to supply goods, food, services, or manufactured products in the State;

(3) Causes tortious injury in the State by an act or omission in the State;

(4) Causes tortious injury in the State or outside of the State by an act or omission outside the State if he regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from goods, food, services, or manufactured products used or consumed in the State;

(5) Has an interest in, uses, or possesses real property in the State; or

(6) Contracts to insure or act as surety for, or on, any person, property, risk, contract, obligation, or agreement located, executed, or to be performed within the State at the time the contract is made, unless the parties otherwise provide in writing."

Md. Cts. & Jud. Proc. Code Ann. § 6-103 (1980 Rep. Vol.).

In Craig v. General Finance Corp. of Illinois, 504 F.Supp. 1033 (D. Md. 1980), this court outlined the analysis to be employed when jurisdiction is asserted under the long arm statute.

"For the statute to apply it is sufficient if any of the provisions of subsection (b) are satisfied. United Merchants & Mfrs., Inc. v. David & Dash, Inc., 439 F.Supp. 1078, 1082 (D.Md.1977); Lawson v. Baltimore Paint & Chemical Corp., 298 F.Supp. 373, 377 (D.Md.1969). Application of the long arm statute is essentially a two-step process. The court must first determine whether a particular subsection purports to authorize service of process on the non-resident. Second, the court must determine whether that service and the attendant exercise of personal jurisdiction comports with due process. See Haynes v. James H. Carr, Inc., 427 F.2d 700, 703 (4th Cir.), cert. denied, 400 U.S. 942, 91 S.Ct. 238, 27 L.Ed.2d 245 (1970); Geelhoed v. Jensen, 277 Md. 220,

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