State, ex rel. Hydraulic Servocontrols Corp. v. Dale

• Decision Date: 30 December 1982
• Docket Number: No. A8101-00243,A8101-00243
• Citation: 294 Or. 381,657 P.2d 211
• Parties: STATE of Oregon, ex rel. HYDRAULIC SERVOCONTROLS CORPORATION, a New York Corporation, Plaintiff-Realtor, v. William M. DALE, Defendant. ; SC 28669.
• Court: Oregon Supreme Court

Page 211

657 P.2d 211

294 Or. 381

STATE of Oregon, ex rel. HYDRAULIC SERVOCONTROLS

CORPORATION, a New York Corporation, Plaintiff-Realtor, v. William M. DALE, Defendant.

No. A8101-00243; SC 28669.

Supreme Court of Oregon.

Argued and Submitted Sept. 7, 1982.

Decided Dec. 30, 1982.

Mildred J. Carmack, Portland argued the cause for plaintiff-realtor. With her on the brief was Schwabe, Williamson, Wyatt, Moore & Roberts, Portland.

Keith Bauer, Salem, and Willard L. Cushing, McMinnville, argued the cause for defendant. Also on the briefs were Parks & Bauer, Salem, and Cushing, Johnstone & Peterson, P.C., McMinnville.

Before LENT, C.J. and LINDE, PETERSON, CAMPBELL, ROBERTS and CARSON, JJ.

CARSON, Justice.

This is a mandamus proceeding brought by Hydraulic Servocontrols Corporation (Hydraulic), a New York corporation, to compel the defendant circuit judge to dismiss (as to it) a complaint in products liability filed in the Circuit Court for Multnomah County by Cascade Steel Rolling Mills, Inc. (Cascade), an Oregon corporation, against Cessna Aircraft Company (Cessna), a Kansas corporation, Western Skyways, Inc. (Western Skyways), a Delaware corporation, The Garrett Corporation (Garrett), a California corporation and Hydraulic. We issued the alternative writ here and in the case of State ex rel. Michelin v. Wells, 294 Or. 296, 657 P.2d 207 (decided this date), to consider, for the first time, the extent of Oregon's long-arm jurisdiction under ORCP 4, in light of the United States Supreme Court's decision in World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980).

In December, 1979, Cascade purchased a 1978 Cessna aircraft in Oregon from Cessna and Western Skyways. Garrett manufactured the engine which incorporated a device called a servo actuator manufactured by Hydraulic. Less than two weeks after Cascade purchased the aircraft, it crashed in California.

The second amended complaint alleges that Hydraulic is liable in strict liability and negligence for defects in the design and manufacture of the servo actuator. Hydraulic moved to dismiss, contending that Oregon lacked personal jurisdiction over it because the aircraft crashed in California and because Hydraulic does no business in Oregon and has no local presence or status. The affidavit accompanying the motion indicates that Hydraulic's only place of business is in New York, that it has no offices in Oregon, and that it does no business with anyone in Oregon. The affidavit also indicates that Hydraulic delivered the servo actuator to AiResearch Manufacturing Company, a division of Garrett, with the knowledge that Garrett would incorporate it into the engine of a Cessna aircraft. The defendant circuit judge denied Hydraulic's motion to dismiss.

The issue is whether, by placing its product into the stream of American commerce so that it reaches consumers in Oregon by means of the commercial distribution activity of others, Hydraulic has sufficient contact with Oregon that exercise of jurisdiction is lawful when an Oregon resident is damaged by defects in that product. We hold that it is.

We previously have held that in applying jurisdictional statutes to nonresidents "two questions are presented: (1) Does the case fall within the terms of [a jurisdictional statute]? If so, (2) Does due process permit an Oregon court, as a matter of constitutional law, to obtain and exercise personal jurisdiction over the defendant in such a case?" State ex rel. Academy Press v. Beckett, 282 Or. 701, 708, 581 P.2d 496 (1978). In this case, the questions merge because the only relevant provision of ORCP 4 is ORCP 4 L, a catchall provision extending Oregon jurisdiction to the outer limits of due process under the Fourteenth Amendment of the United States Constitution. ¹ ORCP 4 L provides for jurisdiction:

"Notwithstanding a failure to satisfy the requirement of sections B. through K of this rule, in any action where prosecution of the action against a defendant in this state is not inconsistent with the Constitution of this state or the Constitution of the United States." ²

Subsections B through K of Rule 4 may appear to be redundant in view of the subsection L catchall provision, but they are not superfluous. Based as they are on facts which the United States Supreme Court has held to be adequate bases for jurisdiction, these more specific provisions serve to narrow the inquiry so that if a case falls within one of them, there is no need to litigate more involved issues of due process. ³ Once a plaintiff alleges facts bringing his or her case within a specific provision, that ordinarily will be the end of the matter. On the other hand, if resort to ORCP 4 L is necessary, then the limits of due process must be explored. This is such a case.

The Due Process Clause of the Fourteenth Amendment has been held to require that personal jurisdiction over a non-resident defendant be based on "minimum contacts" between the defendant and the forum state. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). Those contacts must be such that maintenance of the suit does not offend " 'traditional notions of fair play and substantial justice.' " Id. 326 U.S. at 316, 66 S.Ct. at 158, quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 342, 85 L.Ed. 278 (1940).

In the years since International Shoe announced the minimum-contacts test for exercise of personal jurisdiction by state courts, the United States Supreme Court has elaborated on that test in only a handful of cases. In Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485 (1952), it found jurisdiction in Ohio for a cause of action which arose elsewhere, because defendant maintained what appeared to be a managerial headquarters in Ohio. In McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957), it found California jurisdiction over a Texas life insurance company that had solicited customers by mail, in part because California had authorized its insurance commissioner to accept service of summons in behalf of insurers doing business in the state.

The Supreme Court's cases since McGee tell us what minimum contacts are not rather than what they are, for no decision since McGee has sustained the exercise of in personam jurisdiction. Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958), held that Florida could not exercise jurisdiction over the trustee of a Delaware trust simply because the settlor had moved to Florida after creating the trust and died there. In Kulko v. California Superior Court, 436 U.S. 84, 98 S.Ct. 1690, 56 L.Ed.2d 132 (1978), the Supreme Court held that, in a mother's action against her divorced husband for custody and child support modifications, California did not obtain in personam jurisdiction over the nonresident, nondomiciled father, even though the father and mother had married in California, the father briefly had been in the state, and he had acquiesced in the desire of one child to live in California.

None of the cases following International Shoe have considered whether a manufacturer is subject to an action on a products liability theory in a state where it has no direct contacts. The closest case factually is World-Wide Volkswagen Corp. v. Woodson, supra, in which plaintiffs sought to bring a products liability action in an Oklahoma state court against the German manufacturer, the Northeast regional distributor, and the New York local retailer of an Audi automobile plaintiffs had purchased in New York. A defect in the automobile had allegedly caused injury to plaintiffs as they drove through the State of Oklahoma. Although the manufacturer did not object to jurisdiction, both the regional distributor, World-Wide Volkswagen, and the retailer, Seaway Volkswagen, Inc., challenged the jurisdiction of the State of Oklahoma, each claiming that it lacked sufficient contacts with that state.

As the Supreme Court saw it, the issue was whether an Oklahoma court could exercise in personam jurisdiction consistent with the Due Process Clause, "when the defendant's only connection with Oklahoma [was] the fact that an automobile sold in New York to New York residents became involved in an accident in Oklahoma." 444 U.S. at 287, 100 S.Ct. at 562. Denying jurisdiction, the court repeated its holding in International Shoe, that "a state court may exercise personal jurisdiction over a nonresident defendant only so long as there exist 'minimum contacts' between the defendant and the forum state." 444 U.S. at 291, 100 S.Ct. at 564.

The requirement of minimum contacts, the court said, performs two related but distinct functions. "It protects the defendant against the burdens of litigating in a distant or inconvenient forum. And it acts to ensure that the States, through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system." 444 U.S. at 292, 100 S.Ct. at 564.

The first of these functions, typically described in terms of "reasonableness" or "fairness," is less critical than it once was. The Supreme Court noted that the barriers to inconvenient litigation have been relaxed over the years because of fundamental changes in the American economy; modern transportation and communication make it " 'much less burdensome for a party sued to defend himself in a State where he engages in economic activity.' " 444 U.S. at 293, 100 S.Ct. at 565, quoting McGee, 355 U.S. at 222-23, 78 S.Ct. at 200-01.

Perhaps because of the decrease in importance of the first function, the World-Wide Volkswagen court focused primarily on the federalism concerns. The "reasonableness" of asserting jurisdiction over the defendant must be assessed " 'in the context of our federal system of government.' " 444 U.S. at 293-94, 100 S.Ct. at 565, citing International Shoe, 326 U.S. at 317, 66 S.Ct. at 158. Inherent in...