State v. Nv Sumatra Tobacco Trading, Co.

• Decision Date: 21 July 2008
• Docket Number: No. 26522.,26522.
• Citation: 666 S.E.2d 218,379 S.C. 81
• Court: South Carolina Supreme Court
• Parties: STATE of South Carolina, Respondent, v. NV SUMATRA TOBACCO TRADING, CO., Appellant.

666 S.E.2d 218

379 S.C. 81

STATE of South Carolina, Respondent, v. NV SUMATRA TOBACCO TRADING, CO., Appellant.

No. 26522.

Supreme Court of South Carolina.

Heard May 28, 2008.

Decided July 21, 2008.

Rehearing Denied September 25, 2008.

Joel W. Collins, Jr., Gray T. Culbreath, and Christian Stegmaier, of Columbia; Christopher L. Rissetto and Jason P. Matechak, of Washington, D.C., for appellant.

Attorney General Henry Dargan McMaster and Assistant Deputy Attorney General J. Emory Smith, Jr., of Columbia, for respondent.

Acting Chief Justice MOORE.

Respondent (the State) filed a complaint alleging that appellant, NV Sumatra Tobacco Trading Co. (Sumatra), is a tobacco product manufacturer under the Tobacco Escrow Fund Act, S.C.Code Ann. § 11-47-10, et seq. (Supp.2007). The State alleged Sumatra had failed to make the escrow deposit and provide the certification required by the Act for cigarettes that had been sold in South Carolina.

Sumatra filed an answer and moved to dismiss the action for lack of personal jurisdiction. In a 2003 order, the court ruled it had personal jurisdiction. The parties then filed cross-motions for summary judgment. In a 2006 order, the court granted the State's motion and denied Sumatra's motion. The court found that Sumatra had failed to comply with the Escrow Fund Act and assessed a civil penalty of $307,630.08. The court also prohibited Sumatra from selling cigarettes to South Carolina consumers for a period of two years. Finally, the court ordered Sumatra to pay attorney fees of $7,875.00 and filing fees of $95.00. Sumatra appeals both the 2003 and 2006 orders.

FACTS

Under the Master Settlement Agreement, a group of United States-based tobacco product manufacturers agreed to pay money damages to the participating states, including South Carolina, for Medicare and Medicaid costs incurred by the states in paying health care expenses of in-state cigarette smokers and for education and cessation programs.

The South Carolina Tobacco Escrow Fund Act requires a tobacco product manufacturer having sales of cigarettes in this state (whether directly or through a distributor, retailer, or similar intermediary) to:

(a) become a participating manufacturer, (as that term is defined in section II(jj) of the Master Settlement Agreement)¹ and generally perform its financial obligations under the Master Settlement Agreement; or

(b)(1) place into a qualified escrow fund² by April 15 of the year following the year in question the following amounts (as such amounts are adjusted for inflation)—... for ... 2001 ...: $0.136125 per unit sold ...

S.C.Code Ann. § 11-47-30 (Supp.2007). The Act defines "tobacco product manufacturer" to include an entity that

(1) manufactures cigarettes anywhere that such manufacturer intends to be sold in the United States, including cigarettes intended to be sold in the United States through an importer ... [or]

(2) is the first purchaser anywhere for resale in the United States of cigarettes manufactured anywhere that the manufacturer does not intend to be sold in the United States; ...

§ 11-47-20(i).

Sumatra is a corporation organized under the laws of the Republic of Indonesia and its business address is located in Indonesia. Sumatra produces a number of tobacco products, including United brand cigarettes, the cigarettes at issue here. Sumatra also sells its products on the Indonesian retail market. Sumatra alleges it sells tobacco products destined for non-Indonesian markets solely to UNICO Trading Pte., Ltd. (UNICO), a Singapore corporation. Sumatra alleges UNICO is not an agent of Sumatra or a distributor of Sumatra's products, but that UNICO acts entirely as an independent reseller. Sumatra states that it and UNICO are separate legal entities with no overlapping ownership or control and that UNICO has no authority to bind or otherwise act on Sumatra's behalf.

Sumatra admits that UNICO may have sold cigarettes produced by Sumatra to Silmar Trading Ltd., a British Virgin Islands corporation. Sumatra states it does not have any contractual relationship with Silmar Trading to sell its cigarettes in South Carolina. Sumatra states that Silmar Trading may have engaged American Automotive Security Products, d/b/a F.T.S. Distributors (FTS), a United States importer based in Miami, Florida, for the purpose of selling tobacco products produced by Sumatra in the United States.

ISSUES

I. Did the circuit court err by denying Sumatra's motion to dismiss the complaint for lack of personal jurisdiction?

II. Did the circuit court err by granting summary judgment to the State?

DISCUSSION

I. Personal jurisdiction

Sumatra argues that, when determining whether personal jurisdiction exists the court erred by relying on an affidavit of Basil E. Battah, the president of FTS. Sumatra claims the affidavit is not authenticated; however, this argument is not preserved for review. At the 2003 hearing, Sumatra objected to the introduction of the affidavit on the grounds of irrelevance and hearsay. Sumatra merely mentioned the affidavit was not authenticated. Sumatra did not raise this issue in any of its submissions to the lower court including the motion for reconsideration of the personal jurisdiction order. In fact, Sumatra previously used the Battah affidavit in making its argument on the merits that Sumatra was not shipping to a United States distributor. Therefore, Sumatra's arguments regarding the authentication of the Battah affidavit and its arguments regarding the alleged facial defects of the document are not preserved for the Court's review. See Holy Loch Distribs., Inc. v. Hitchcock, 340 S.C. 20, 531 S.E.2d 282 (2000) (to preserve an issue for appellate review, the issue must have been raised to and ruled upon by the trial court). Given the authentication argument is not preserved, the fact the Battah affidavit is a duplicate rather than the original is of no moment.³ See Rule 1003, SCRE (a duplicate is admissible to same extent as an original unless (1) a genuine question is raised as to the authenticity of the original or (2) in the circumstances it would be unfair to admit the duplicate in lieu of the original).

Sumatra argues the court erred by denying Sumatra's motion to dismiss for lack of personal jurisdiction. The court found that the connections of Sumatra's cigarettes, known as the United brand, to the United States are numerous. The court cited to Sumatra's admission that it manufactured the United brand and owned the United States trademark for it in 2001. The court noted the bill of lading attached to the Battah affidavit which showed a shipment of over 91,000 pounds of Sumatra cigarettes to the United States to FTS in December 2000. The court noted the Department of Revenue reports that 6,868,000 United brand cigarettes were sold in 2001, including those shipped by FTS. The court further noted that Sumatra had filed an ingredient report with the Center for Disease Control.

The 2003 court found the allegations in the complaint that Sumatra intended to sell cigarettes in the United States are amply sufficient to make the prima facie showing for jurisdiction due to the large volume of Sumatra's sales in South Carolina. The court pointed out that Sumatra acknowledged that its ownership of the trademark for United brand cigarettes could be construed as an indication that Sumatra itself has the intent to sell this brand in the United States.

The 2003 court found that personal jurisdiction was properly asserted over Sumatra because the requirements of due process are met, i.e. there are sufficient minimum contacts by Sumatra with South Carolina such that the court has the power to adjudicate the action and the exercise of jurisdiction is fair. The court stated that Sumatra's conduct has demonstrated its intent to avail itself of the vast, lucrative markets of each state in the United States.

The question of personal jurisdiction over a nonresident defendant is one which must be resolved upon the facts of each particular case. Cockrell v. Hillerich & Bradsby Co., 363 S.C. 485, 611 S.E.2d 505 (2005). The decision of the trial court will be affirmed unless unsupported by the evidence or influenced by an error of law. Id.

Initially, the court properly found that the allegations in the complaint that Sumatra intended to sell its United brand cigarettes in South Carolina were sufficient to make the prima facie showing for personal jurisdiction. See Cockrell, supra (at the pretrial stage, the burden of proving personal jurisdiction over a nonresident is met by a prima facie showing of jurisdiction in the complaint or in the affidavit); Mid-State Distribs., Inc. v. Century Importers, Inc., 310 S.C. 330, 426 S.E.2d 777 (1993) (there is no "other evidence" requirement for personal jurisdiction where the complaint itself demonstrates jurisdiction). While the 2003 court could have stopped its analysis there, it chose to proceed with the more in-depth determination of personal jurisdiction. The 2006 court found that Sumatra had not offered any reason for a different conclusion regarding personal jurisdiction on summary judgment.

Specific jurisdiction over a cause of action arising from a defendant's contacts with the state is granted pursuant to the long-arm statute. Cockrell, supra (citing S.C.Code Ann. § 36-2-803). In the instant case, S.C.Code Ann. § 36-2-803(1)(h) (2003)⁴ applies to the facts of this case and states that a court may exercise personal jurisdiction over a person who acts directly or by an agent as to a cause of action arising from the person's production, manufacture, or distribution of goods with the reasonable expectation that those goods are to be used or consumed in this State and are so used and consumed. South Carolina's long-arm statute has been construed to extend to the outer limits of the due process clause. Id. Because South Carolina treats its long-arm statute as coextensive with the due process clause, the sole question becomes...