State ex inf. Danforth v. Reader's Digest Ass'n, Inc.

• Decision Date: 08 September 1975
• Docket Number: No. 58433,58433
• Citation: 527 S.W.2d 355
• Parties: STATE ex inf. John C. DANFORTH, Attorney General, Appellant, v. The READER'S DIGEST ASSOCIATION, INC., Respondent.
• Court: Missouri Supreme Court

Page 355

527 S.W.2d 355

STATE ex inf. John C. DANFORTH, Attorney General, Appellant, v. The READER'S DIGEST ASSOCIATION, INC., Respondent.

No. 58433.

Supreme Court of Missouri, En Banc.

Sept. 8, 1975.

John C. Danforth, Atty. Gen., Harvey M. Tettlebaum, Asst. Atty. Gen., Jefferson City, for appellant.

Joseph E. Stevens, Jr., William C. Hopkins, II, Kansas City, for respondent; Lathrop, Koontz, Righter, Clagett, Parker & Norquist, Kansas City, William Barnabas McHenry, New York City, of counsel.

MORGAN, Judge.

The Attorney General of Missouri filed, in the trial court, an information in the nature of quo warranto wherein it was alleged that The Reader's Digest Association, Inc., was conducting a promotion for the sale of magazines and various items of merchandise in violation of the lottery laws and public policy of the state of Missouri--Article III, § 39(9) of the 1945 Missouri Constitution and §§ 563.430 and 563.440, RSMo 1969--and therein prayed that respondent 'be ousted and excluded from exercising all privileges and rights granted it as a foreign corporation transacting business in this state and . . . fined an amount equal to its gross receipts attributable to any advertising . . . using the Reader's Digest Ninth Annual Sweepstakes.' Service of process was effected under § 506.500, RSMo 1969, commonly referred to as the long-arm statute. Respondent sought to remove the controversy to the U.S. District Court for the Western District of Missouri, but the cause was remanded as one not arising under federal law or the Constitution of the United States. (Civil Action No. 19262--2, Memorandum and Order by Judge Collinson.) Respondent then filed a motion to quash service of process premised on the trial court's lack of jurisdiction over the person of respondent and for dismissal for lack of jurisdiction over the subject matter. After the filing of exhaustive suggestions and oral arguments by the parties, the trial court found that the (due process) jurisdictional requirements of the long-arm statute were satisfied, but the motion to dismiss was sustained for lack of jurisdiction over the subject matter on the theory that the state lottery laws conflict with Art. 1, § 8, Clause 7 (postal powers) of the U.S. Constitution and are unconstitutional as applied to users of the U.S. Mail because 'respondent is subject only to the Federal Lottery Statutes, 18 U.S.C. § 1302, and regulations promulgated by the U.S. Postal Service thereunder.' ¹ The state has appealed from the final order of dismissal. Jurisdiction to resolve federal and state constitutional questions lies in this court. Art. V, § 3, 1945 Missouri Constitution.

In late 1970 and early 1971, respondent mailed or caused to be mailed into Missouri soliciations for magazine subscriptions and purchase orders for numerous items. Receipt of the same entitled the recipient to participate in respondent's 'Ninth Annual $400,000. Sweepstakes.' ² Prior to the mailing, respondent sought and obtained from the Assistant General Counsel of the Mailability Division, U.S. Postal Department, an advisory ruling that use of the mails to distribute such solicitations and receive responses therefrom would not violate federal statutes prohibiting the use of the mails in the conduct of a lottery or gift enterprise. Counsel for the Mailability Division concluded that there was no violation because the necessary element of 'consideration' was lacking although the elements of 'chance' and 'prize' were obviously present; and, thus declared that the department had 'no standing to initiate action under federal laws.'

Article III, § 39(9) of this state's constitution declares that '(t)he general assembly shall not have power . . . (t)o authorize lotteries or gift enterprises for any purpose, and shall enact laws to prohibit the sale of lottery or gift enterprise tickets, or tickets in any scheme in the nature of a lottery.' Sections 563.430 and 563.440, RSMo 1969, adopted in apparent compliance with the constitutional mandate, outlaw lotteries and the promotion thereof as felonious offenses and prescribe penalties for violations. The most recent and presently controlling interpretation of such provisions may be found in Mobil Oil Corporation v. Danforth, 455 S.W.2d 505 (Mo. banc 1970).

In the present posture of this case, however, we are not called on to decide whether or not there has been a substantive violation of the laws of this state. Since the appeal is from an 'order of dismissal,' we assume that respondent's promotional activity does constitute a proscribed lottery in the state of Missouri.

Thus, the underlying question is whether or not this state can enforce its lottery laws against respondent. For the answer to be in the affirmative, it must be found that the trial court had jurisdiction over both the 'person' of respondent and the 'subject matter' of the action. The parties, while taking opposing positions on each of the issues, have in both suggestions of record and formal briefs reviewed extensively historical precedents and legal writings which have been helpful; but, due to the number thereof, it would be inappropriate in an opinion to seek to establish or detail the possible relevance of each--most all of which deal with 'preemption' under the 'commerce clause' of the U.S. Constitution.

The first issue is whether this state can constitutionally assert in personam jurisdiction over respondent in view of its contacts within the state, which allegedly have been made without the fixed presence of offices or officers in Missouri. This court established sufficient standards in State ex rel. Deere and Company v. Pinnell, 454 S.W.2d 889 (banc 1970), to resolve the issue. Therein it was held, l.c. 892: 'In concluding our effort to determine the legislative intent of the General Assembly of Missouri, we are convinced that the ultimate objective was to extend the jurisdiction of the courts of this state over nonresident defendants to that extent permissible under the Due Process Clause of the Fourteenth Amendment of the Constitution of the United States.

'(1, 2) What precise federal constitutional limitations there presently may be on the application of this jurisdictional concept rests in the interpretation placed thereon by the Supreme Court of the United States. Since Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565, this question has been the subject of innumerable judicial decisions and exhaustive academic writings, but '* * * just where this line of limitation falls has been the subject of prolific controversy, particularly with respect to foreign corporations.' McGee v. International Life Insurance Co., 355 U.S. 220, 222, 78 S.Ct. 199, 200, 2 L.Ed.2d 223. In McGee (loc. cit. 222, 78 S.Ct. 200) the court recognized that, 'Looking back over this long history of litigation a trend is clearly discernible toward expanding the permissible scope of state jurisdiction over foreign corporations and other nonresidents.' More specifically, '* * * due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice. '" International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95. See Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283.'

Later consideration of the question may be found in State ex rel. Apco Oil Corp. v. Turpin, 490 S.W.2d 400 (Mo.App.1973). See also American Hoechst Corp. v. Bandy Laboratories, Inc., 332 F.Supp. 241 (W.D.Mo.1970); Fulton v. Chicago, Rock Island and Pacific Railroad Co., 481 F.2d 326 (8th Cir. 1973), cert. denied, 414 U.S. 1040, 94 S.Ct. 540, 38 L.Ed.2d 330 (1973) and 27 A.L.R.3d 397.

The trial court ruled that '(t)he activity of the respondent of which complaint is made in this action establishes sufficient minimum contact with the State of Missouri to satisfy the jurisdictional requirements of § 506.500, RSMo 1969,' which reads, in part: 'Any corporation, who . . . does any of the acts enumerated in this section, thereby submits such . . . corporation . . . to the jurisdiction of the courts of this state as to any cause of action arising from the doing of any of such acts: The transaction of any business within this state; The making of any contract within this state; * * *' Related sections detail the manner in which service of process must be made.

We think it sufficient to state that we believe the promotional activity engaged in by respondent in Missouri to sell magazines and various items of merchandise to thousands of persons constitutes 'the transaction of any business' within the meaning of the statute. This is not a case involving minimal contacts on a sporadic basis but a continuous business scheme involving potential obligations of citizens of this state. As the court said in Reader's Digest Ass'n v. State ex rel. Conner, 251 So.2d 552, at 556 (Fla.App., First Dist. 1971): 'We are not concerned here . . . with 'the mere mailing of magazines into Florida', nor are we concerned with a single act on the part of defendant. We are concerned with Reader's Digest invading the offices and homes of more than 10,000 Florida citizens and, at this stage of the pleadings, urging them to participate in an alleged lottery and purchase various goods and merchandise, such activities allegedly being contrary to the criminal and civil laws of Florida.'

The factual situation presented falls within the scope of acceptable due process concepts as not only enunciated by this court but, more importantly, by the Supreme Court of the United States. The issue is resolved against respondent.

The second issue involves 'subject matter' jurisdiction. It can not be disputed but that the lottery laws of Missouri prohibit lotteries of all kinds and the advertisement thereof. Although not expressly...