WA Kraft Corp. v. Terrace on Park, Inc.

• Citation: 337 F. Supp. 206
• Decision Date: 01 February 1972
• Docket Number: Civ. A. No. 53-72.
• Parties: W. A. KRAFT CORP., (New Jersey) a corporation of the State of New Jersey, Plaintiff, v. TERRACE ON the PARK, INC., a corporation of the State of New York, Defendant.
• Court: U.S. District Court — District of New Jersey

337 F. Supp. 206

W. A. KRAFT CORP., (New Jersey) a corporation of the State of New Jersey, Plaintiff, v. TERRACE ON the PARK, INC., a corporation of the State of New York, Defendant.

Civ. A. No. 53-72.

United States District Court, D. New Jersey.

February 1, 1972.

Crummy, O'Neill, Del Deo & Dolan, by John A. Ridley, Newark, N. J., for plaintiff.

Kirschenbaum & Shapiro, by Lewis Perkiss, New York City, for defendant.

MEMORANDUM OPINION

LACEY, District Judge:

In this diversity action (28 U.S.C. § 1332) defendant, a New York corporation, challenges, on Due Process grounds, extraterritorial service of process upon it in New York under New Jersey's "long arm" rule R. 4:4-4(c) (1), as permitted by F.R.Civ.P. 4(d) (7).

Two questions are raised. First, how far has New Jersey itself gone in its application of its rule? Second, assuming service here is congruent with, or within, the parameters of the state's interpretation of that rule, does this service abridge constitutional guarantees? The latter question is pressed upon us because the Due Process clause of the Fourteenth Amendment limits, albeit by blurred and indistinct lines, the power of state courts to enter in personam judgments against persons not served within the forum's boundaries.¹ Pulson v. American Rolling Mill Co., 170 F.2d 193, 194 (1 Cir. 1948).

The dual nature of the problem thus posed was stated by the New Jersey Supreme Court in a recent application of the state "long arm" rule, as follows Avdel Corp. v. Mecure, 58 N.J. 264, 268, 277 A.2d 207, 209 (1971):

Our long-arm rule, unlike statutes in some other states, permits service on nonresident defendants subject only to "due process of law." R. 4:4-4(e). In other words, we will allow out-of-state service to the uttermost limits permitted by the United States Constitution....

Similarly, the Court of Appeals for this Circuit has stated Bernardi Bros., Inc. v. Pride Mfg., Inc., 427 F.2d 297, 298 (3 Cir. 1970):

... The New Jersey rule recognizes no limitations on extra-territorial service other than that imposed by the United States Constitution ... Therefore, the question presented ... is whether the United States Constitution would permit New Jersey or federal courts in New Jersey to exercise jurisdiction .... See Partin v. Michaels Art Bronze Co., 202 F.2d 541, 543 (3rd Cir. 1953).

The question presented, whether a constitutional guarantee has been abridged, is one of federal law and state authorities are not controlling. Scanapico v. Richmond, F. & P. R. Co., 439 F.2d 17, 19 (2 Cir. 1970); Partin v. Michaels Art Bronze Co., 202 F.2d 541, 543 (3 Cir. 1953).

We are therefore to determine whether the defendant, neither licensed to do business, nor doing business here, nonetheless had the necessary "minimum contacts with ... (New Jersey) such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.' .." International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945).

In drawing upon settled legal principles to resolve the issue, it is of critical importance to recognize that this case does not involve whether there is a substantiality of contacts of a foreign corporation sufficient to support in personam jurisdiction in a suit on a claim unrelated to those contacts. Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485 (1952). In such a case a foreign corporation's activities within the forum, it has been said, must be "fairly extensive" before the burden of defending a suit there may be imposed upon it without offending "traditional notions of fair play and substantial justice." Ratliff v. Cooper Laboratories, Inc., 444 F. 2d 745, 748 (4 Cir. 1971), quoting F. James, Civil Procedure 640 (1965) (emphasis added by Court). Instead, we deal here with whether the contacts of this defendant justify jurisdiction in personam where the claim is based on a contract which, as will appear, had, both in its formulation and its fulfillment, New Jersey impact.

As both parties concede, the precise question thus shaped has not been fully and completely answered by the United States Supreme Court. Aside from general principles, International Shoe is of little aid, except as it suggested the different standards, qualitatively and quantitatively, to be applied, dependent upon whether the asserted claim was or was not "contact" connected. Closest to the point is McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed. 2d 223 (1957).

In McGee a non-resident insurance company mailed a reinsurance certificate to a California resident in California and offered to continue his insurance. The California resident accepted the offer and mailed his premium from California to the defendant in Texas. The Supreme Court held, upon those facts, that the insurance contract between the parties had "substantial connection" with California so as to render the insurance company (which had no other contact with California) subject to jurisdiction in that state.

The Supreme Court said (355 U.S. at 223, 78 S.Ct. at 201):

... It is sufficient for purposes of due process that the suit was based on a contract which had substantial connection with that State. ...

McGee noted that with increasing "nationalization of commerce," the tremendous growth "in the amount of business conducted by mail across state lines," and the frequency with which "commercial transactions touch two or more States," there had developed "a trend ... clearly discernible toward expanding the permissible scope of state jurisdiction over foreign corporations and other non-residents." (355 U.S. at 223, 78 S.Ct. at 201).²

On the other hand, shortly after McGee, the United States Supreme Court warned Hanson v. Denckla, 357 U.S. 235, 251, 78 S.Ct. 1228, 1238, 2 L.Ed.2d 1283 (1958):

... It is a mistake to assume that this trend heralds the even-See Vanderbilt v. Vanderbilt, 354 U.S. 416, 418, 77 S.Ct. 1360, 1362, 1 L.Ed. tual demise of all restrictions on the personal jurisdiction of state courts. 2d 1456. Those restrictions are more than a guarantee of immunity from inconvenient or distant litigation. They are a consequence of territorial limitations on the power of the respective States. However minimal the burden of defending in a foreign tribunal, a defendant may not be called upon to do so unless he has had the "minimal contacts" with that State that are a prerequisite to its exercise of power over him.

Against this background we examine the essential facts in the case at bar, mindful that it is the plaintiff who shoulders the burden of proof by a preponderance of the evidence. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936).³

The transaction in suit had its genesis on March 3, 1970, when defendant by letter from its agent Monroe, in New York, solicited from plaintiff, at its New Jersey office, a bid on specifications "for the standby diesel generating plant required for this project." The letter stated that the defendant would issue the Purchase Order to "the successful installing contractor ...." A purchase order did thereafter issue, from defendant to plaintiff, in April, 1970, in New York. It was for two generators, to be installed in New York. This purchase order was never fulfilled because defendant cancelled its order after plaintiff had apparently incurred certain expense. The controversy between the parties led to correspondence, conferences (at least one of which took place in New Jersey), telephone calls, and finally litigation, with plaintiff commencing suit against the defendant in this Court (Civ. 1364-70). Defendant never answered; instead, during the time extended by stipulation therefor, its legal representatives had numerous conferences with plaintiff's, culminating apparently happily,...