Vasquez v. Falcon Coach Co., Inc.

• Decision Date: 12 June 1974
• Docket Number: Civ. No. A3-74-38.
• Citation: 376 F. Supp. 815
• Parties: Jose VASQUEZ, Plaintiff, v. FALCON COACH CO., INC., a Kansas corporation, Defendant.
• Court: U.S. District Court — District of South Dakota

376 F. Supp. 815

Jose VASQUEZ, Plaintiff, v. FALCON COACH CO., INC., a Kansas corporation, Defendant.

Civ. No. A3-74-38.

United States District Court, D. North Dakota, Southeastern Division.

June 12, 1974.

Maurice G. McCormick, Vogel, Vogel, Brantner & Kelly, Fargo, N. D., for plaintiff.

Frank T. Knox, Lanier, Knox & Olson, Fargo, N. D., for defendant; Phillip C. Gans, Cogswell & Cox, Denver, Colo., of counsel.

MEMORANDUM AND ORDER

BENSON, Chief Judge.

The above entitled action was removed from Cass County District Court, First Judicial District Court of North Dakota, to this Court on April 17, 1974. The complaint alleges that the defendant, Falcon Coach Company, Inc., (Falcon) negligently manufactured a mobile home purchased by plaintiff, said mobile home allegedly being defective and unsuitable as a mobile home. It is also alleged that the defendant breached implied and express warranties, and asserts strict liability as a basis for recovery. The plaintiff prays for damages of $10,637.51, the purchase price of the mobile home.

The plaintiff, Jose Vasquez, is a citizen of North Dakota and is the purchaser of the mobile home. Defendant, Falcon, is a Kansas corporation, which manufactures mobile homes, including the home in question, with its principal place of business in Kansas.

Falcon, on May 7, moved this Court to quash an attempted service of process, or in the alternative to dismiss the action for failure to state a claim upon which relief can be granted, or in the alternative to change the venue of this action to Kansas.

I. MOTION TO QUASH SERVICE OF PROCESS

Contentions of the Parties

Falcon's motion to quash service of process is based upon a claim that the court lacks jurisdiction over the defendant, the contention being that the contacts of the defendant with the State of North Dakota — namely, that it merely delivers its goods to North Dakota and does isolated repair work in the state — are insufficient under the Due Process Clause of the Fourteenth Amendment of the United States Constitution, and North Dakota law, to establish jurisdiction of this court over the defendant. Falcon points to its lack of contacts with North Dakota as follows:

"Falcon maintains no office in North Dakota; nor does it solicit business directly from citizens of North Dakota. Falcon has no appointed agent in North Dakota. It enters into no contracts, or finance transactions in North Dakota. Falcon does no installation work or construction work in North Dakota. Falcon neither purchases nor sells goods directly on consignment in North Dakota. Falcon maintains no stock or goods in North Dakota. Falcon owns no property in North Dakota."

In stating that it does not sell directly to North Dakota citizens, it appears that Falcon is referring to the ultimate user or consumer of its mobile homes. An affidavit of a mobile home dealer in Fargo, Edward P. Powers of Powers Homes, states that sales were solicited from him in Fargo by Falcon sales representatives, whereupon he agreed to purchase several trailers and did, in fact, purchase several trailers. Powers states that Falcon Coach Company, Inc., delivered all of these trailers to Fargo.

Plaintiff, in contending that Falcon has sufficient contact with North Dakota to establish the jurisdiction of this court, relies under Rule 4(d)(7) F.R.Civ.P. upon Rule 4(b)(2)(B) of the North Dakota Rules of Civil Procedure which states:

"(b) Jurisdiction of person

(2) Personal jurisdiction based upon contacts. A court of this state may exercise personal jurisdiction over a person who acts directly or by an agent, as to any claim for relief arising from the person's

(B) contracting to supply or supplying services, goods, or other things in this state. . ."

Choice of Law

Defendant relies upon two North Dakota decisions — Fisher v. Mon Dak Truck Lines, Inc., 166 N.W.2d 371 (N.D.1969); and Scranton Grain Co. v. Lubbock Machine & Supply Company, 167 N.W.2d 748 (N.D.1969) — to support his contention that this court has no jurisdiction over a foreign corporation based upon the contacts, or lack of contacts, in this case. Defendant stresses that these decisions were decided on a constitutional basis and were not merely interpreting the reach of the state's long arm statute. As such, defendant urges that these state decisions are binding on this court as to whether the contacts herein stated are sufficient under the Due Process Clause for this Court to assert jurisdiction.

Defendant, in contending that the constitutional limits of jurisdiction over out-of-state corporations is governed by state law, is mistaken. The leading case of Arrowsmith v. United Press International, 320 F.2d 219 (2nd Cir. 1963), states the choice of law rule as follows: The question of whether an assertion of jurisdiction is offensive to due process requirements is a question of federal law, whereas the question of whether a corporation is amenable to service of process is a question of state law. A federal court will look to the state statutes and decisions to determine whether a state court could exercise jurisdiction based upon the contacts present once it is determined that the due process clause would allow an assertion of jurisdiction. In other words, a state may, but need not, subject a foreign corporation to in personam jurisdiction to the full extent permitted by the Due Process Clause of the Fourteenth Amendment. Perkins v. Benquet Consolidated Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485 (1952). The Arrowsmith rule has been universally adopted, 2 Moore's Federal Practice ¶ 4.25(7); 6 A.L.R.3d Federal or state law as controlling, in diversity action, whether foreign corporation is amenable to service of process, § 3, and is followed in the Eighth Circuit, Simpkins v. Council Manufacturing Corporation, 332 F.2d 733 (8th Cir. 1964); Jennings v. McCall Corporation, 320 F.2d 64 (8th Cir. 1963).

Due Process Limitations

Service upon a foreign corporation as prescribed by Rule 4(d)(3) is not valid unless there exists an adequate basis for the assertion of in personam jurisdiction over the non-resident. 2 Moore's Federal Practice ¶ 4.25(1).

Since the Supreme Court's decision of Bank of Augusta v. Earle, 38 U.S. 519, 13 Peters 519, 10 L.Ed. 274 (1839), which served as the basis for limiting suits against a corporation to the state of its incorporation on the theory that the corporation could not exist or be present beyond the state of its legal creation, there has been a tremendous expansion to include situations where out-of-state service is valid.

"As technological progress has increased the flow of commerce between the States, the need for jurisdiction over nonresidents has undergone a similar increase. At the same time, progress in communications and transportation has made the defense of a suit in a foreign tribunal less burdensome. In response to the changes, the requirement for personal jurisdiction over nonresidents have evolved. . ." Hanson v. Denckla, 357 U.S. 235, 250, 251, 78 S.Ct. 1228, 1238, 2 L.Ed.2d 1283 (1958).

Thus, the Supreme Court expanded the basis of jurisdiction over foreign corporations on theories of express or implied "consent", Lafayette Insurance Co. v. French, 59 U.S. 404, 18 How. 404, 15 L.Ed. 451 (1855); and doing business of sufficient scope or quality to constitute "presence" in the forum state, Philadelphia & Reading Rwy. Co. v. McKibben, 243 U.S. 264, 37 S.Ct. 280, 61 L.Ed. 710 (1917).

The Supreme Court set the guidelines for the modern concept of out-of-state service in International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945).

"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.'" at 316.

The demands of due process, the Supreme Court stated,

"may be met by such contacts of the corporation with the state of the forum as to make it reasonable, in the context of our federal system of government, to require the corporation to defend the particular suit brought there. An `estimate of the inconveniences' which would result to the corporation from a trial away from its `home' or principal place of business is relevant in this connection. . . ." at 317.

While it is true that International Shoe involved a continuous and systematic activity on the part of the subject corporation in maintaining several salesmen in the forum state, the court set broad guidelines not limited to the facts of the case.

"Whether due process is satisfied must depend rather upon the quality and nature of the activity in relation to the fair and orderly administration of the laws which it was the purpose of the due process clause to insure. . . ."

"But to the extent that a corporation exercises the privilege of conducting activities within a state, it enjoys the benefits and protection of the laws of that state. The exercise of that privilege may give rise to obligations; and, so far as those obligations arise out of or are connected with the activities within the state, a procedure which requires the corporation to respond to a suit brought to enforce them can, in most instances, hardly be said to be undue." at 319 (citations omitted).

This Court believes that International Shoe's minimum contacts doctrine encompasses the relation between Falcon and North Dakota.

The Supreme Court has upheld the exercise of state jurisdiction over nonresident corporations on less significant contacts than those found in International Shoe. In Travelers Health Association v. Virginia, 339 U.S. 643, 70 S.Ct. 927, 94 L.Ed. 1154 (1950), the Virginia State Corporation Commission issued a cease and desist order preventing Travelers from selling or advertising, by mail or otherwise, insurance in Virginia in that Travelers failed to...