U.S. Sprint Communications Co. Ltd. Partnership v. Mr. K's Foods, Inc.

• Decision Date: 26 January 1994
• Docket Number: No. 92-1804,92-1804
• Citation: 624 N.E.2d 1048,68 Ohio St.3d 181
• Parties: U.S. SPRINT COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, Appellant, v. MR. K'S FOODS, INC., Appellee.
• Court: Ohio Supreme Court

Page 181

68 Ohio St.3d 181

624 N.E.2d 1048

U.S. SPRINT COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, Appellant, v. MR. K'S FOODS, INC., Appellee.

No. 92-1804.

Supreme Court of Ohio.

Submitted Sept. 29, 1993.

Decided Jan. 26, 1994.

SYLLABUS BY THE COURT

Once an Ohio court acquires personal jurisdiction over a nonresident defendant for claims arising in Ohio, Civ.R. 18(A) permits joinder of related claims that do not arise in Ohio, as long as granting jurisdiction for all claims does not deprive defendant of the right to due process of law.

In this case we are presented with an opportunity to further define when an Ohio court may properly assert personal jurisdiction over a nonresident defendant for claims arising in and outside Ohio.

On August 24, 1989, appellant, U.S. Sprint Communications Company Limited Partnership ("U.S. Sprint"), a telecommunications company headquartered in Kansas City, Missouri, filed a complaint in Franklin County Common Pleas Court against appellee, Mr. K's Foods, Inc., a food manufacturing company located in Buffalo, New York.

Mr. K's manufactures pizza products and cookies for wholesale distribution and for home delivery. The company's home delivery division supplies these goods to independent distributors located in various states including Ohio. Mr. K's makes phone calls to the distributors, and the distributors place orders and receive deliveries from Mr. K's.

Mr. K's maintains no offices or employees outside Buffalo. Instead, sales are generated by an extensive telemarketing operation. Mr. K's Foods telemarkets in New York state through its office in Buffalo, and in other states through independent distributors. In Ohio, two of Mr. K's distributors were Mr. K's Distribution and Sales of Columbus, Inc. and Mr. K's Distribution and Sales of Cleveland, Inc. The president of Mr. K's, Anthony Korobellis, who wholly owned the stock of these latter two companies, incorporated them to take over failing affiliated independent distributors. ¹

U.S. Sprint's complaint arises from several long distance telephone contracts arranged between U.S. Sprint and a number of Mr. K's independent distributors. It alleges that Mr. K's Foods owes U.S. Sprint $155,307.58 plus interest for unpaid long distance telephone service on seventeen accounts ordered by Mr. K's. Mr. K's argues that these accounts were the responsibility of the independent distributors which had no formal affiliation with Mr. K's. Of the seventeen accounts, the record indicates that six were located in Ohio, one in Pennsylvania and the remaining ten in New York. The unpaid bills for the six Ohio accounts totaled $6,194.11.

A copy of the complaint was served on Korobellis in Buffalo, New York. When Mr. K's failed to respond, U.S. Sprint moved for a default judgment. On December 19, 1989, the trial court granted the motion and awarded U.S. Sprint $155,307.58 plus interest and costs.

Mr. K's filed a motion for relief from judgment arguing the decision was void because the trial court lacked personal jurisdiction, or, alternatively, for relief from judgment pursuant to Civ.R. 60(B). On May 3, 1990, the trial court overruled the motion and concluded Mr. K's did "do business" in Ohio sufficient to invoke the state's "long-arm" statute. The court of appeals reversed this decision and remanded the case for an evidentiary hearing, ruling that, because there were numerous factual issues that should have been resolved at trial level, the trial court erred in finding Mr. K's subject to personal jurisdiction.

On remand and following the prescribed evidentiary hearing, the trial court again found Mr. K's had submitted to Ohio jurisdiction and entered judgment for U.S. Sprint in the original amount of $155,307.58 plus ten percent interest and costs. Mr. K's appealed for a second time, and once more the court of appeals reversed the trial court. The appeals court, after closely examining the record, found "that a separate cause of action exists for each account which [U.S. Sprint] has identified in its complaint. Personal jurisdiction must be determined separately for each account." The court concluded that the eleven phone accounts located outside Ohio were not subject to Ohio's "long-arm" statute, and then remanded the case to the trial court to determine whether "long-arm" jurisdiction may be extended over Mr. K's for the remaining six accounts which were located in Ohio. The court further stated that a finding of personal jurisdiction must be made individually for each account.

The cause is now before this court pursuant to the allowance of a motion to certify the record.

Donnamarie Landsberg, Kansas City, MO, for appellant.

WRIGHT, Justice.

The question before us today is whether an Ohio court may exercise personal jurisdiction over a foreign corporation in order to adjudicate seventeen separate but similar causes of action, when only six of those causes of action arose in Ohio. For the reasons stated below we reverse the court of appeals and hold that the trial court had an adequate basis upon which to properly assert in personam jurisdiction over the defendant for all seventeen causes of action.

When determining whether a state court has personal jurisdiction over a foreign corporation the court is obligated to engage in a two-step analysis. First the court must determine whether the state's "long-arm" statute and applicable civil rule ² confer personal jurisdiction, and, if so, whether granting jurisdiction under the statute and the rule would deprive the defendant of the right to due process of law pursuant to the Fourteenth Amendment to the United States Constitution. Fallang v. Hickey (1988), 40 Ohio St.3d 106, 532 N.E.2d 117; Kentucky Oaks Mall Co. v. Mitchell's Formal Wear, Inc. (1990), 53 Ohio St.3d 73, 559 N.E.2d 477.

I

In ruling that the trial court did not have personal jurisdiction over eleven of seventeen causes of action, the court of appeals based its decision on Ohio's "long-arm" statute, R.C. 2307.382. That law defines the specific activities for which a foreign corporation may become subject to a judgment in personam in an Ohio court. It states in relevant part:

"(A) 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:

"(1) Transacting any business in this state;

" * * *

"(C) When jurisdiction over a person is based solely upon this section, only a cause of action arising from acts enumerated in this section may be asserted against him."

Mr. K's Foods, relying on R.C. 2307.382(C), argued below that if a court bases personal jurisdiction on R.C. 2307.382(A)(1), then it may only entertain those causes of action that arise from the company "[t]ransacting any business" in Ohio. While Mr. K's maintained the company has no responsibility for the unpaid telephone bills of any of its distributors, it argued that, in any event, the trial court could only exercise jurisdiction over the six Ohio accounts totaling $6,194.11. ³ Mr. K's claimed further that because the remaining eleven accounts had no connection with Ohio and therefore did not "arise from" Mr. K's "[t]ransacting any business" in Ohio, the court improperly asserted jurisdiction and thus the default judgment with respect to these accounts is void ab initio. Consequently, Mr. K's urged, $149,113.47 of U.S. Sprint's $155,307.58 default judgment award must be set aside. We disagree.

Under R.C. 2307.382(A)(1), a foreign corporation submits to the personal jurisdiction of an Ohio court if its activities lead to "[t]ransacting any business " (emphasis added) in Ohio. Because it is such a broad statement of jurisdiction, R.C. 2307.382(A)(1) has given rise to a variety of cases which "have reached their results on highly particularized fact situations, thus rendering any generalization unwarranted." 22 Ohio Jurisprudence 3d (1980) 430, Courts and Judges, Section 280. With no better guideline than the bare wording of the statute to establish whether a nonresident is transacting business in Ohio, the court must, therefore, rely on a case-by-case determination.

For purposes of personal jurisdiction, this court has long held the mere solicitation of business by a foreign corporation does not constitute transacting business in Ohio. Wainscott v. St. Louis-San Francisco Ry. Co. (1976), 47 Ohio St.2d 133, 1 O.O.3d 78, 351 N.E.2d 466. Instead, as the United States Supreme Court has stated, a nonresident's ties must "create a 'substantial connection' with the forum State." Burger King Corp. v. Rudzewicz (1985), 471 U.S. 462, 475, 105 S.Ct. 2174, 2184, 85 L.Ed.2d 528, 542.

It is clear from the record that Mr. K's Foods solicited business in Ohio. The company frequently made long distance telephone calls to Ohio to sell its products on behalf of its home delivery division. Furthermore, the facts also indicate that independent distributors located in Ohio placed orders for pizza and cookies with Mr. K's in Buffalo, which then shipped these goods to Ohio for ultimate sale here. This same pattern of operation was repeated between Buffalo and New York state, Pennsylvania, Delaware, Michigan and Illinois. In all instances U.S. Sprint provided the long distance telephone service. And while Mr. K's denies any formal affiliation with the independent contractors, its long distance phone service with U.S. Sprint was ordered, not by the distributors, but by Anthony Korobellis, president of Mr. K's Foods. The subject of this suit is the breach of contract between U.S. Sprint and Mr. K's Foods due to unpaid telephone accounts for long distance charges made in Ohio and elsewhere.

From this record it is abundantly clear that Mr. K's Foods was "[t]ransacting any business in this state" within the plain meaning of R.C. 2307.382(A)(1). Once it has been determined the defendant is transacting business in Ohio pursuant to the "long-arm" statute, a court may accordingly exercise jurisdiction...