Thompson v. Ecological Science Corporation

• Decision Date: 06 February 1969
• Docket Number: No. LR-68-C-192.,LR-68-C-192.
• Citation: 295 F. Supp. 1307
• Parties: Vance M. THOMPSON, Jr.; William Hadley Thompson; W. Dane Clay; W. Dane Clay, Trustee; and R. Mike Butner, Plaintiffs, v. ECOLOGICAL SCIENCE CORPORATION, Defendant.
• Court: U.S. District Court — Eastern District of Arkansas

295 F. Supp. 1307

Vance M. THOMPSON, Jr.; William Hadley Thompson; W. Dane Clay; W. Dane Clay, Trustee; and R. Mike Butner, Plaintiffs, v. ECOLOGICAL SCIENCE CORPORATION, Defendant.

No. LR-68-C-192.

United States District Court E. D. Arkansas, W. D.

February 6, 1969.

W. Dane Clay and James Guy Tucker, Jr., of Rose, Meek, House, Barron, Nash & Williamson, Little Rock, Ark., for plaintiff.

Louis P. Bickel, Dallas, Tex., Abner McGehee, Little Rock, Ark., for defendant.

MEMORANDUM OPINION

HENLEY, District Judge.

This diversity case is now before the Court on the motion of defendant to dismiss for lack of in personam jurisdiction. The motion has been submitted on the complaint and exhibits thereto, the motion itself, affidavits, and memorandum briefs. The jurisdictional facts are not in substantial dispute.

Plaintiff, Vance M. Thompson, Jr., is a native of Arkansas but presently a citizen of Tennessee; the other plaintiffs, William Hadley Thompson, W. Dane Clay, W. Dane Clay, Trustee, and R. Mike Butner, are citizens of Arkansas. The defendant, Ecological Science Corporation, formerly Southern Gulf Utilities, Inc., is a Florida corporation having its principal place of business in that State. Another corporation involved in the case, Energy Dynamics, Inc., is a Delaware corporation; the location of its principal place of business, if it has one, is not revealed by the record, but it is clearly not in Arkansas. Judged by the amount of plaintiffs' demand the amount in controversy is far in excess of $10,000, exclusive of interest and costs. Thus, federal subject matter jurisdiction is established.

In October 1967 while defendant was still known as Southern Gulf Utilities, Inc., hereinafter Southern Gulf, representatives of defendant contacted plaintiffs in Arkansas and conducted negotiations which led to the final execution of a written contract and related documents, copies of which are attached to the complaint as exhibits. In a nutshell, the agreement was that a new corporation, to be known as Energy Dynamics, Inc., was to be formed for the purpose of selling a certain patented incinerator under a license from the holder of the patent rights. Southern Gulf was to own 51 percent of the stock in Energy Dynamics, Inc. and plaintiffs were to own 49 percent of the stock. The complaint alleges that defendant breached the contract in a number of respects not to be detailed at this juncture, and plaintiffs claim damages in the sum of $3,000,000.

After the execution of the contract the corporate name of Southern Gulf was changed to Ecological Science Corporation.¹ Southern Gulf never qualified to do business in Arkansas, has never designated an agent for service in this State, and has never "done business" here in the conventional sense of the term. The alleged jurisdiction of this Court is not predicated upon any "enduring relationship" between Southern Gulf and Arkansas. Rather, jurisdiction is based solely upon alleged "conduct" of Southern Gulf in Arkansas.

More specifically, the plaintiffs claim that jurisdiction exists by virtue of section 1, subd. C, par. 1(a) of Arkansas Act 101 of 1963, Ark.Stats.,Ann., § 27-2502, subd. C, par. 1(a), which is part of the Arkansas version of the Uniform Interstate and International Procedure Act. That section provides that the courts of a State, including federal courts sitting therein, may exercise personal jurisdiction over a person or corporation acting directly or by an agent as to a cause of action arising from the "transacting (of) any business in (the) State" by that person or corporation, provided that the cause of action arises from such transaction of business.² And paragraph No. 3 of the complaint alleges that in October 1967 the President and other principal officers of the defendant "came to Arkansas and negotiated with plaintiffs the agreement which is the subject matter of this action." It is further alleged that: "This cause of action arises out of such acts done in Arkansas and accrues from the doing of such business in Arkansas. Therefore, defendant is subject to service of process herein in Arkansas, although it is not qualified to do business in Arkansas."

The position of plaintiff is that Arkansas contacts of defendant, presently to be described in somewhat more detail, were sufficient to bring defendant within the scope of section 27-2502, subd. C, par. 1(a) that the cause of action asserted in the complaint arose out of those contacts so as to satisfy the requirement of section 27-2502, subd. C, par. 2; and that the exercise of in personam jurisdiction with respect to the defendant is constitutionally permissible under the liberal concepts expressed in cases like International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95; Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485; McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223; cf. Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283.

The position of the defendant is that the conduct of its officers in Arkansas was not sufficient to bring the Arkansas statute into play, and, further, that to assert jurisdiction over the defendant under the statute would be violative of the Fourteenth Amendment to the Constitution of the United States.

In Davis v. Triumph Corporation, E.D. Ark., 258 F.Supp. 418, 422, this Court had occasion to say:

"International Shoe Co. v. State of Washington, supra, the leading case, makes it clear that the right of a State to exercise jurisdiction with respect to a foreign corporation does not depend upon whether it is `doing business' there within the traditional and conservative meaning given to that term. Rather, due process is satisfied if the corporation has `certain minimum contacts with (the forum State) such that the maintenance of the suit does not offend "traditional notions of fair play and substantial justice."' (326 U.S. at 316, 66 S.Ct. at 158.) The Court also held that the requirements of due process are met by such contracts between the corporation and the forum State `as to make it reasonable, in the context of our federal system of government, to require the corporation to defend the particular suit which is brought there.' (Ibid, at 317, 66 S.Ct. at 158.)

"In his recent opinion in the case of Waukesha Building Corporation v. Jameson, W.D.Ark., 246 F.Supp. 183, Judge Miller in speaking of International Shoe had this to say (pp. 186-187 of 246 F.Supp.):

"`The so-called "doing business" statutes are bottomed upon the defendant's presence with respect to the cause of action sued upon or certain other minimum contacts. As stated in International Shoe Co. v. State of Washington * * * as a constitutional minimum it must be shown that the defendant has had at least minimum contacts to render it amenable to the jurisdiction of the courts of a state. The underlying principles are, of course, fair play, reasonable notice and opportunity to defend. What constitutes minimum contacts within a state to render a corporation amenable to the jurisdiction of the courts of that state is far less than the traditional concept of doing business.'"

There has not developed as yet any large body of Arkansas case law construing and applying the Act with which the Court is concerned. However, what authority there is makes it clear that the statute will be given a broad and liberal construction, Pennsalt Chemical Corp. v. Crown Cork & Seal Co., Inc., 244 Ark. 638, 426 S.W.2d 417; Safeway Stores v. Shwayder Bros., 238 Ark. 768, 384 S.W.2d 473; and the Court will assume that as a matter of Arkansas law the statute extends to the outer limits permitted by due process.

The question of whether the federal Constitution permits a State to exercise in personam jurisdiction over a non-domesticated foreign corporation has produced a tremendous volume of decisions, and it would be impractical to abstract or discuss even a substantial number...