Starbrite Distributing, Inc. v. Excelda Mfg. Co., Docket Nos. 103536

• Decision Date: 13 May 1997
• Docket Number: No. 9,Docket Nos. 103536,103563,9
• Citation: 454 Mich. 302,562 N.W.2d 640
• Parties: , 32 UCC Rep.Serv.2d 1111 STARBRITE DISTRIBUTING, INC, Plaintiff-Appellant, v. EXCELDA MANUFACTURING COMPANY, Defendant/Cross-Plaintiff/Appellant, and P.D. George Company, Defendant/Cross-Defendant/Appellee. Calendar
• Court: Michigan Supreme Court

Page 640

562 N.W.2d 640

454 Mich. 302, 32 UCC Rep.Serv.2d 1111

STARBRITE DISTRIBUTING, INC, Plaintiff-Appellant, v. EXCELDA MANUFACTURING COMPANY, Defendant/Cross-Plaintiff/Appellant and P.D. George Company, Defendant/Cross-Defendant/Appellee.

Docket Nos. 103536, 103563.

Calendar No. 9.

Supreme Court of Michigan.

Argued Nov. 13, 1996.

Decided May 13, 1997.

[454 Mich. 303] Harris & Literski by Charles W. Widmaier, Brighton, for Starbrite Distributing, Inc.

Alan J. Czekaj, Brighton, for Excelda Manufacturing Company.

Fraser, Trebilcock, Davis & Foster, P.C. by C. Mark Hoover and Charyn K. Hain, Lansing (Popham, Haik, Schnobrich & Kaufman, Ltd., of counsel) by John Golden and Paul L. Nettleton, Miami, FL, for P.D. George Company.

OPINION

MICHAEL F. CAVANAGH, Justice.

The State of Michigan may exercise limited personal jurisdiction under its long-arm statute if two things are established. First, the rules of statutory construction must support the exercise of jurisdiction over the defendant. Second, the exercise of limited personal jurisdiction may not violate the Due Process Clause of the Fourteenth Amendment. Jeffrey v. Rapid American Corp., 448 Mich. 178, 186, 529 N.W.2d 644 (1995).

This case presents two issues for our review. First, we must decide whether the Court of Appeals erred in holding that the delivery of goods F.O.B. St. Louis, Missouri, was dispositive of whether the defendant, P.D. George, entered into a contract for materials to be furnished in Michigan pursuant to subsection 5 of the long-arm statute. M.C.L. § 600.715(5); M.S.A. § 27A.715(5). Second, if we find that subsection 5 was satisfied, then we must also decide whether the Court of Appeals erred in holding that the defendant had insufficient minimum contacts with Michigan to support its exercise of limited personal jurisdiction.

We hold that F.O.B. shipping terms are not dispositive of whether the defendant entered into a contract for materials to be furnished in Michigan. The statutory language "furnishing" is broader than "delivery," and in this case, P.D. George entered into a contract for materials to be furnished in Michigan. Also, we hold that the defendant had sufficient minimum contacts with Michigan to permit exercise of limited personal jurisdiction over the defendant.

I. FACTS AND PROCEEDINGS

P.D. George Company, a Delaware corporation doing business in Missouri, sold Golden Teak Oil to Excelda Manufacturing Company, a Michigan corporation, at the instigation of Robert Pollack of Robert's Innovations, located in New Jersey. The concentrated teak oil, a chemical surface coating used in the marine industry, was shipped to Excelda F.O.B. St. Louis, Missouri. Excelda diluted the chemicals and packaged them for shipment to Starbrite Distributing, Inc., a Florida corporation.

A defect arose in the concentrate that affected its quality and shelf life. Starbrite sued Excelda and P.D. George in Michigan, ¹ alleging breach of contract by Excelda and breaches of various warranties by both Excelda and P.D. George. In defending the action by Starbrite, Excelda initiated a cross-claim against P.D. George. In response, P.D. George moved for summary disposition pursuant to MCR 2.116(C)(1) on the basis of a lack of limited personal jurisdiction. Starbrite and Excelda claimed that jurisdiction existed pursuant to M.C.L. § 600.715; M.S.A. § 27A.715, Michigan's longarm statute.

The circuit judge denied P.D. George's motion for summary disposition. P.D. George appealed, and the Court of Appeals reversed, holding that there was a lack of personal jurisdiction over P.D. George. Excelda and Starbrite both sought leave to appeal to this Court, which we granted.

II. THE LONG-ARM STATUTE

Michigan's long-arm statute provides:

The existence of any of the following relationships between a corporation or its agent and the state shall constitute a sufficient basis of jurisdiction to enable the courts of record of this state to exercise limited personal jurisdiction over such corporation and to enable such courts to render personal judgments against such corporation arising out of the act or acts which create any of the following relationships:

(1) The transaction of any business within the state.

(2) The doing or causing any act to be done, or consequences to occur, in the state resulting in an action for tort.

(3) The ownership, use, or possession of any real or tangible personal property situated within the state.

(4) Contracting to insure any person, property, or risk located within this state at the time of contracting.

(5) Entering into a contract for services to be performed or for materials to be furnished in the state by the defendant. [M.C.L. § 600.715; M.S.A. § 27A.715 (emphasis added).]

In the lower courts and here, P.D. George argued that subsection 5 of the long-arm statute was not satisfied. F.O.B. is a UCC delivery term. ² When the term is F.O.B. point of shipment, the seller bears the expense and risk of putting the goods in the possession of the carrier. ³ Once the goods are in the possession of the carrier, title passes to the purchaser. Thus, P.D. George argued that once the title to the goods passed to the carrier, the goods were furnished in Missouri, and could not be furnished in Michigan.

In denying P.D. George's motion for summary disposition on the basis of a lack of personal jurisdiction, the circuit judge stated:

I think the statute does talk about furnishing and entering into a contract to furnish materials in this state and I think that's what happened here, as I understand the facts. It's sufficient to meet the requirements of the statute as well as any due process question. It looks as if it was not a single delivery but an ongoing arrangement and I further believe that the question of the U.C.C. application is not dispositive of this situation. I think that the U.C.C. had other concerns in mind, certainly not jurisdictional ones.

When P.D. George appealed, the Court of Appeals reversed. 211 Mich.App. 475, 536 N.W.2d 558 (1995). It concluded that the trial court erred in finding that the delivery term was not dispositive of the issue of the place of delivery. It reasoned that because Excelda agreed that title transferred to it when P.D. George delivered the goods to the carrier in St. Louis, the goods were furnished in Missouri, and could not be furnished in Michigan.

We agree with the circuit judge that the UCC delivery term does not control because the UCC is concerned with issues such as who bears the expense of shipping and the risk of loss in the transfer of goods. These are concerns separate from whether the goods are furnished in Michigan for purposes of the long-arm statute. We agree with Starbrite and Excelda that furnishing is a broader concept than the simple concept of delivery. If the Legislature intended place of delivery to be dispositive of where the goods were furnished, then the Legislature would have used that term, rather than furnishing. Thus, we hold that F.O.B. shipping terms are not dispositive of whether the defendant entered into a contract for services to be performed or for materials to be furnished in Michigan. Here, the long-arm statute was satisfied because the defendant entered into a contract for materials to be furnished in Michigan. It delivered the goods it manufactured to a common carrier in St. Louis, specifying that the goods should be shipped to a specific Michigan address. ⁴

III. DUE PROCESS

After determining that subsection 5 of the long-arm statute was satisfied, we next must consider whether the defendant had sufficient minimum contacts with Michigan to support the exercise of limited personal jurisdiction. As noted above, the circuit judge believed that the Due Process Clause was not violated. However, the Court of Appeals held that the exercise of personal jurisdiction in these circumstances would violate the Due Process Clause.

As this Court stated in Witbeck v. Bill Cody's Ranch Inn, 428 Mich. 659, 666, 411 N.W.2d 439 (1987), "[t]he Due Process Clause of the Fourteenth Amendment 'does not contemplate that a state may make binding a judgment in personam against an individual or a corporate defendant with which the state has no contacts, ties, or relations.' " Quoting International Shoe Co v. Washington, 326 U.S. 310, 319, 66 S.Ct. 154, 160, 90 L.Ed. 95, 161 ALR 1057 (1945). The Court noted that the constitutional inquiry "is whether the defendant purposefully established 'minimum contacts' in the forum state 'such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' " Id., quoting International Shoe, at 316, 66 S.Ct. at 158. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 105 S.Ct. 2174, 2183, 85 L.Ed.2d 528 (1985).

In determining whether sufficient minimum contacts ⁵ exist between a defendant and Michigan to support Michigan's exercise of limited personal jurisdiction, the Court must apply a three-pronged test:

First, the defendant must have purposefully availed itself of the privilege of conducting activities in Michigan, thus invoking the benefits and protections of this state's laws. Second, the cause of action must arise from the defendant's activities in the state. Third, the defendant's activities must be so substantially connected with Michigan to make the exercise of jurisdiction over the defendant reasonable. [Jeffrey, supra at 186, 529 N.W.2d 644, quoting Mozdy v. Lopez, 197 Mich.App. 356, 494 N.W.2d 866 (1992).]

Considering the first prong, we must determine whether the defendant purposely availed itself of the privilege of exploiting Michigan business opportunities. In Jeffrey, supra, this Court explained:

" '[P]urposeful availment' is something akin either to a deliberate undertaking to do or cause an act or thing to be done in Michigan or conduct which can be properly regarded as a prime generating cause of the effects resulting in Michigan, something more than...