Vermont Yogurt Co. v. Blanke Baer Fruit and Flavor Co., 81-732

Citation321 N.W.2d 315,107 Wis.2d 603
Decision Date05 May 1982
Docket NumberNo. 81-732,81-732
PartiesVERMONT YOGURT COMPANY, a foreign corporation, Plaintiff-Appellant, v. BLANKE BAER FRUIT AND FLAVOR COMPANY, a foreign corporation, Defendant-Respondent.
CourtCourt of Appeals of Wisconsin

Brian E. Butler and John M. Koeppl and Stafford, Rosenbaum, Rieser & Hansen, Madison, for plaintiff-appellant.

Burton A. Strnad and Strnad & Gossens, Milwaukee, for defendant-respondent.

Before GARTZKE, P. J., and BABLITCH and DYKMAN, JJ.

BABLITCH, Judge.

Both the plaintiff and the defendant are nonresident corporations. The defendant does a small amount of business in this state. The plaintiff's cause of action did not arise in Wisconsin, and did not arise out of any contact the defendant had with this state. The broad issue is whether the courts of this state have personal jurisdiction over the defendant under the "doing business" subsection of Wisconsin's long-arm statute, sec. 801.05(1)(d), Stats. The precise issue is whether the trial court correctly held that more substantial contacts by the defendant with this state were required to confer jurisdiction under the statute with respect to a nonresident plaintiff bringing a foreign cause of action than with respect to a resident plaintiff or a local cause of action. We agree with the trial court's conclusion and affirm.

The facts are not in dispute. The plaintiff-appellant is a Vermont corporation doing business on the East Coast. It does no business in Wisconsin. The defendant-respondent is a foreign corporation which manufactures food flavorings in Missouri and New Jersey. The plaintiff purchased food flavorings and ingredients from the defendant which were shipped to the plaintiff in Vermont from Missouri. None of the defendant's products was used by the plaintiff to manufacture any product sold or distributed in Wisconsin. No part of the transactions between the plaintiff and defendant took place in Wisconsin.

The plaintiff commenced this suit for breach of warranty and misrepresentation. The complaint alleges that the defendant represented or warranted that its products contained no artificial components. The plaintiff seeks damages arising when a major retailer/distributor refused to sell or distribute plaintiff's products after it discovered the presence of artificial ingredients. The record does not disclose why the action was brought in Wisconsin. 1

Neither party disputes the trial court's summary of the defendant's contacts with this state, which is as follows:

(1) Defendant has a regional sales representative whose territory includes Wisconsin.

(2) During January 1980 defendant employed a parttime salesperson to sell its products in Wisconsin. This parttime person was a resident of Wisconsin.

(3) Defendant uses Wisconsin firms to distribute its products.

(4) Defendant advertises in national trade magazines.

(5) Defendant does direct mailings to Wisconsin firms.

(6) Defendant sends technical personnel to Wisconsin to assist customers trying new products.

(7) Defendant attended trade shows in Wisconsin and reimbursed its Wisconsin distributors for expenses incurred in attending such trade shows.

(8) Defendant derives 3 percent of its total nationwide sales from Wisconsin.

(9) Defendant is not licensed to do business in Wisconsin. It has no offices, warehouses, or manufacturing plants in Wisconsin. It owns no property, real or personal, in Wisconsin.

In addition, it is not disputed that in the year 1979, preceding the commencement of this action, the defendant's gross receipts from sales in Wisconsin were about $144,000.

The burden is on the plaintiff to establish jurisdiction under this state's long-arm statute, which is to be liberally construed in favor of jurisdiction. Lincoln v. Seawright, 104 Wis.2d 4, 9, 310 N.W.2d 596, 599 (1981). The plaintiff relies on sec. 801.05(1)(d), Stats., which provides:

A court of this state ... has jurisdiction over a person served in an action ... under any of the following circumstances:

(1) LOCAL PRESENCE OR STATUS. In any action whether arising within or without this state, against a defendant who when the action is commenced:

....

(d) Is engaged in substantial and not isolated activities within this state, whether such activities are wholly interstate, intrastate, or otherwise. [Emphasis supplied.]

The focus of sec. 801.05(1)(d), Stats., is solely upon the defendant's contacts with this state. It does not require that the plaintiff be a Wisconsin resident. It does not require a local cause of action. It does not differentiate on its face between actions brought by residents and nonresidents or between foreign and local causes of action.

The trial court's memorandum opinion implied that the defendant's contacts in Wisconsin might be sufficient to support jurisdiction under the statute if the plaintiff were a Wisconsin resident, or if the cause of action had arisen here. It determined, however, that in the absence of either "the level of contacts required to establish jurisdiction must be considerably higher" than otherwise. Under this higher standard, it concluded, the defendant's contacts were insufficient to constitute "substantial and not isolated activities" within the meaning of the statute.

The trial court's conclusion is one of law and is entitled to no special deference from a reviewing court. Afram v. Balfour, Maclaine, Inc., 63 Wis.2d 702, 708, 218 N.W.2d 288, 291 (1974). We nonetheless find its conclusion compelling.

The supreme court has repeatedly stated that the legislature's purpose in creating the various subsections of the long-arm statute was to codify the due process requirements of "minimum contacts" required under International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), and its progeny before the courts of one state could legitimately exercise jurisdiction over the citizens of another. Lincoln, 104 Wis.2d at 10, 310 N.W.2d at 599; Stevens v. White Motor Corp., 77 Wis.2d 64, 74, 252 N.W.2d 88, 93 (1977). It has been held that " 'the statute was intended to provide for the exercise of jurisdiction over nonresident defendants to the full extent consistent with the requisites of due process of law.' " Zerbel v. H. L. Federman & Co., 48 Wis.2d 54, 59-60, 179 N.W.2d 872, 875 (1970), appeal dismissed, 402 U.S. 902, 91 S.Ct. 1379, 28 L.Ed.2d 643 (1971), quoting Flambeau Plastics Corp. v. King Bee Mfg. Co., 24 Wis.2d 459, 464, 129 N.W.2d 237, 240 (1964).

Because of this legislative intent, compliance with the statute is presumed to be compliance with the requisites of due process. Lincoln, 104 Wis.2d at 10, 310 N.W.2d at 599; Schmitz v. Hunter Machinery Co., 89 Wis.2d 388, 401-03, 279 N.W.2d 172, 178-79 (1979). That presumption may be rebutted, however, " 'especially through use of a five item due process jurisdictional contact analysis adopted in Zerbel.' " Lincoln, 104 Wis.2d at 10, 310 N.W.2d at 599, quoting Hasley v. Black, Sivalls & Bryson, Inc., 70 Wis.2d 562, 577, 235 N.W.2d 446, 454 (1975). The Zerbel due process analysis emphasizes (1) the quantity of the defendant's contacts with the state; (2) their nature and quality; (3) the source of the cause of action; (4) the interest of Wisconsin in the action; and (5) convenience of the parties in trying the action in this state. Zerbel, 48 Wis.2d at 65-66, 179 N.W.2d at 878-79.

The plaintiff correctly points out that the due process analysis is not to be employed in the ordinary case. Compliance with the statute makes at least a prima facie case of compliance with constitutional requirements. Schmitz, 89 Wis.2d at 401-03, 279 N.W.2d at 178-79; Schroeder v. Raich, 89 Wis.2d 588, 597, 278 N.W.2d 871, 875 (1979). Due process principles cannot be ignored, however, in construing a statute designed to fulfill them. Statutes must always be construed so as to reach constitutional and reasonable results. Acquisition of Certain Lands by Benson, 101 Wis.2d 691, 697, 305 N.W.2d 184, 187 (Ct.App.1981); Wipperfurth v. U-Haul Co. of Western Wis., Inc., 98 Wis.2d 516, 522, 297 N.W.2d 65, 68 (Ct.App.1980), aff'd, 101 Wis.2d 586, 304 N.W.2d 767 (1981).

While the statute must be read broadly, it must also be remembered that the specific items listed in sec. 801.05, Stats., represent a codification of the minimum contacts required to comport with due process. If we interpret the provisions of sec. 801.05 too broadly, we risk losing the appropriate minimum contacts which are "built in" to the statute.

Lincoln, 104 Wis.2d at 14, 310 N.W.2d at 601.

The focus of the due process requirements is on the fairness and substantial justice of requiring the defendant to appear and defend against litigation in the forum state. In order to justify a state's assumption of jurisdiction over a nonresident corporation, the corporation must have "such contacts ... with the state of the forum as 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." [Emphasis supplied.] International Shoe, 326 U.S. at 317, 66 S.Ct. at 158.

The question, then, is whether sec. 801.05(1)(d), Stats., should be interpreted to require more substantial "doing business" contacts within this state when jurisdiction is invoked by a nonresident, whose cause of action has no connection with this state, than when it is invoked by a resident or by one whose cause of action arose in Wisconsin. We conclude that both the statutory and the due process analysis dictate an affirmative answer to that question.

In adopting the liberal interpretation rule with respect to a former version of the "doing business" statute, the supreme court noted the familiar rule that "great consideration should be given to the object sought to be accomplished by a statute." Huck v. Chicago, St. P., M. & O. R. Co., 4 Wis.2d 132, 137, 90 N.W.2d...

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