St. Joe Paper Co. v. Superior Court

• Decision Date: 26 June 1981
• Citation: 120 Cal.App.3d 991,175 Cal.Rptr. 94
• Court: California Court of Appeals Court of Appeals
• Parties: , 1981-1 Trade Cases P 64,135 ST. JOE PAPER COMPANY, Petitioner, v. SUPERIOR COURT of the State of California, In and For the CITY AND COUNTY OFSAN FRANCISCO, Respondent. ESPRIT DE CORP., Real Party In Interest. CONSOLIDATED PACKAGING CORPORATION, Petitioner, v. SUPERIOR COURT of the State of California, In and For the CITY AND COUNTY OFSAN FRANCISCO, Respondent. ESPRIT DE CORP., Real Party In Interest. Civ. 51171, Civ. 51172.

Page 94

175 Cal.Rptr. 94

120 Cal.App.3d 991, 1981-1 Trade Cases P 64,135

ST. JOE PAPER COMPANY, Petitioner, v. SUPERIOR COURT of the State of California, In and For the CITY AND COUNTY OFSAN FRANCISCO, Respondent.

ESPRIT DE CORP., Real Party In Interest.

CONSOLIDATED PACKAGING CORPORATION, Petitioner, v. SUPERIOR COURT of the State of California, In and For the CITY AND COUNTY OFSAN FRANCISCO, Respondent.

ESPRIT DE CORP., Real Party In Interest.

Civ. 51171, Civ. 51172.

Court of Appeal, First District, Division 2, California.

June 26, 1981.

Hearing Denied Sept. 2, 1981.

Steinhart, Falconer & Morgenstein, Martin D. Morgenstein, Jean L. Bertrand, San Francisco, Fulbright & Jaworski, B. J. Bradshaw, Layne Kruse, Houston, Tex., for St. Joe Paper Company.

Steinhart, Falconer & Morgenstein, Marvin D. Morgenstein, Jean L. Bertrand, San Francisco, Ross, Hardies, O'Keefe, Babcock & Parsons, Michael H. King, Eric S. Palles, Chicago, Ill., for Consolidated Packaging Corporation.

Francis O. Scarpulla, Stephen V. Scarpulla, Scarpulla & Scarpulla, A Professional Corporation, San Francisco, for Esprit De Corp.; Hazel Weiser, San Francisco, of counsel, on brief.

TAYLOR, Presiding Justice.

These petitions for writs of mandate ¹, pursuant to Code of Civil Procedure section 418.10, subdivision (c), seek review of the superior court's denial of the motions to quash service ² filed by the nonresident defendant corporations, Consolidated Packaging Company (Consolidated) and St. Joe Paper (St. Joe), collectively paper companies. The paper companies are two of 34 foreign corporate defendants named by the real party in interest, Esprit De Corp. (Esprit) in its class action (No. 750975) filed under this state's anti-trust statute, the Cartwright Act (Bus. & Prof. Code § 16720 et seq.), alleging a national conspiracy to fix the prices of corrugated containers purchased by Esprit from out-of-state wholesalers or distributors, and delivered in California. The paper companies contend that Esprit has not met its burden of proving jurisdiction, as Esprit's allegations of nationwide conspiracy and their activities in California are not sufficient "minimum contacts" to provide a basis for in personam jurisdiction under this state's long arm statute, Code of Civil Procedure section 410.10. ³ We do not agree and conclude that for the reasons set forth below, both petitions must be denied.

The petitions allege the following pertinent facts, which are not in dispute: Consolidated, a Michigan corporation with its principal place of business in Chicago, Illinois, is engaged in manufacturing corrugated containers at three plants located in Battle Creek, Michigan, Flint, Michigan, and Pulaski, Tennessee. Consolidated's western-most offices are in Chicago, Illinois. It has never sought to qualify to do business in California and has not owned any real property here. Consolidated had no business dealings with Esprit, and never has entered into any contract in California.

Consolidated, however, has made one sale to a California resident. In March, 1974, Consolidated received an unsolicited telephone call at its Chicago office from Julius Goldman Egg City of Moore Park, California, for the purchase of corrugated containers at a cost of $29,412.90. The containers were shipped to Julius Goldman Egg City for its own use.

Consolidated also sells corrugated materials to the United States Government General Services Administration (GSA) in Michigan. The GSA buys corrugated materials from Consolidated in Battle Creek, Michigan, and ships some of these materials into California. Consolidated also sold corrugated cartons to California Canners, Inc.

St. Joe is a Florida corporation. Three or four times a year, two of St. Joe's salesmen have been sent to California to call on national companies that do business in other states in addition to California. The calls made by such salesmen in California do not result in any sales in California, as all of the resulting orders are for corrugated containers to be purchased from the St. Joe plant where they are produced and used locally.

One direct purchaser from St. Joe, E.S.B., Inc., ships corrugated containers from a St. Joe plant to California. E.S.B. is headquartered in Philadelphia, Pennsylvania. E.S.B.'s purchase orders for containers originate in Philadelphia, and all of its payments to St. Joe are made from there. The containers to fill such orders are manufactured at St. Joe's Memphis, Tennessee plant. E.S.B. takes title to the goods at the plant and directs destination and shipment by common carrier; these shipments may go to any of 16 states, including California. St. Joe regularly sells boxes to E.S.B. with the knowledge that they will be used in California.

Esprit alleged that over a period of 11 years, each of the paper companies was engaged in an out-of-state price-fixing conspiracy to injure California consumers, in violation of the Cartwright Act, and reaped unusually high profits as a result of its unlawful activity.

The Judicial Council's comments to section 410.10 relating to service on foreign corporations, so far as pertinent, declare: "A state has power to exercise judicial jurisdiction over a foreign corporation which has done, or has caused to be done, an act in the state with respect to any cause of action in tort arising from such act ... unless the nature of the act and of the corporation's relationship to the state make the exercise of such jurisdiction unreasonable....

"A state (has) power to exercise judicial jurisdiction over a foreign corporation which causes effects in the state by an omission or act done elsewhere with respect to causes of action arising from these effects, unless the nature of the effects and of the corporation's relationship to the state make the exercise of such jurisdiction unreasonable." (Emphasis added.)

In Sibley v. Superior Court, 16 Cal.3d 442, 446, 128 Cal.Rptr. 34, 546 P.2d 322, our Supreme Court agreed and stated in pertinent part: "The mere causing of an 'effect' in California, however, as acknowledged in the Judicial Council comment quoted above, is not necessarily sufficient to afford a constitutional basis for jurisdiction; notwithstanding this 'effect,' the imposition of jurisdiction may be 'unreasonable.' As was held in Internat. Shoe Co. v. Washington, supra, 326 U.S. 310 (66 S.Ct. 154, 90 L.Ed. 95), a suit may not be maintained where jurisdiction offends ' "traditional notions of fair play and substantial justice. " ' (Id., at pp. 316-317 (66 S.Ct. at pp. 158-159), 90 L.Ed. at pp. 101-103 citations omitted.)"

The furthest extension of jurisdiction on the basis of foreign state activity allegedly causing harm in California are Quattrone v. Superior Court, 44 Cal.App.3d 296, 118 Cal.Rptr. 548, and United California Bank v. First Bank of Oak Park, 98 Cal.App.3d 439, 159 Cal.Rptr. 607 (U.S. cert. den.) In Quattrone, the court upheld the exercise of jurisdiction over a nonresident defendant, a Pennsylvania resident, who had prepared deceptive financial data intended to be acted upon in California to determine the rate of exchange for corporate shares to be issued in this state. After discussing Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283, and McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223, the court stated the rule governing the exercise of jurisdiction on such a basis as follows: "From McGee and Hanson we conclude that it is reasonable to exercise jurisdiction on the basis of the defendant intentionally causing 'effects in the state by an omission or act done elsewhere' whenever (a) the effects are of a nature 'that the State treats as exceptional and subjects to special regulation,' or (b) the defendant has, in connection with his causing such effects in the forum state, invoked 'the benefits and protections of its laws.' " (Quattrone, supra, 44 Cal.App.3d at p. 306, 118 Cal.Rptr. 548; emphasis added). In United California Bank, supra, this court followed Quattrone and held reasonable the exercise of jurisdiction over a foreign bank which issued a certificate of deposit, knowing the borrower would take it to California and use it as security for a loan and that the security would be worthless because of the bank's right of offset. We based our conclusion on: 1) the bank did an intentional act, knowing it would cause effects in California, the nature of which California deems exceptional and subject to special regulation; 2) the bank anticipated an economic benefit from its act which caused the effect in this state.

Here, as in Quattrone, and United California Bank, both supra, this state treats anti-trust violations as subject to the special regulation of the Cartwright Act. We note that immediately after the U.S. Supreme Court in Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707, limited the jurisdiction of the federal courts to adjudication of direct purchase anti-trust damage actions, the California Legislature amended Business and Professions Code section 16750 to add the second paragraph of subdivision (a), as set forth, so far as pertinent, below. ⁴ (Stats.1978, ch. 536, § 1.) Thus, Esprit, as an indirect purchaser, was precluded from raising its Cartwright anti-trust claims against the paper companies in any forum except California. ⁵ (Cf. Code Civ.Proc., § 410.30.)

The minimum contacts of a defendant with a state need not arise from actual physical activity of the defendant in a forum state. Activities taking place in other states which entail foreseeable effects in a forum state may be sufficient to satisfy the minimum contacts requirement of International Shoe Co., supra. (See Great Western United Corp. v. Kidwell (5th Cir. 1978) 577 F.2d 1256, 1266; Wilkerson v. Fortuna Corp., 5th Cir., 554 F.2d 745, 747; Travis v. Anthes Imperial Limited, 8 Cir., 473 F.2d 515; Eyerly Aircraft Co. v. Killian, 5th Cir., 414 F.2d 591; Hitt v. Nissan Motor...