Western Union Telegraph Co. v. TSI, LTD., Civ. A. No. 82-389.

• Decision Date: 06 August 1982
• Docket Number: Civ. A. No. 82-389.
• Citation: 545 F. Supp. 329
• Parties: The WESTERN UNION TELEGRAPH COMPANY, Plaintiff, v. T. S. I., LTD., Defendant.
• Court: U.S. District Court — District of New Jersey

545 F. Supp. 329

The WESTERN UNION TELEGRAPH COMPANY, Plaintiff, v. T. S. I., LTD., Defendant.

Civ. A. No. 82-389.

United States District Court, D. New Jersey.

August 6, 1982.

COPYRIGHT MATERIAL OMITTED

Carpenter, Bennett & Morrissey by Laurence Reich, Newark, N. J., and Wachtell, Lipton, Rosen & Katz by Theodore Gewertz, New York City, for plaintiff.

Walder, Sondak, Berkeley & Brogan by Thomas J. Spies, Newark, N. J., and Pray, Walker, Jackman, Williamson & Marlar by Floyd L. Walker, Tulsa, Okl., for defendant.

OPINION

STERN, District Judge.

In this action brought pursuant to 28 U.S.C. § 1332, plaintiff Western Union Telegraph Company ("Western Union"), a New York corporation having its principal place of business in New Jersey, charges defendant T. S. I., Ltd. ("TSI"), an Oklahoma corporation with its principal place of business in Oklahoma, with breach of contract. Defendant TSI now moves pursuant to Fed. R.Civ.P. 12(b)(2) to dismiss the action for lack of in personam jurisdiction. The Court holds that it has in personam jurisdiction over the defendant and that the motion must therefore be denied.¹

I. FACTS

This action arises out of three contracts between Western Union and TSI relating to TSI's option to purchase and purchase of transponders² on Western Union's Westar V and Westar VI communications satellites.³ On March 12, 1981, James Ragan, a vice-president of Western Union, contacted George Milne, a vice-president and general manager of TSI, about the possible purchase by TSI of one or more transponders.⁴ Ragan informed Milne that prior to the commencement of negotiations, Western Union required that TSI forward a letter of credit in the amount of $1.5 million to secure TSI's obligations in the proposed transactions. On March 26, 1981, TSI sent this letter of credit to Western Union's New Jersey offices.

On April 2, 1981, TSI's president, Gene Dennison, its chief financial advisor, Thomas Hermann, and Milne visited Western Union's offices in New Jersey to discuss the proposed purchase of transponders. A five-hour discussion ensued at which basic terms of the contract were discussed including the identity of the satellites on which the transponders were to be sold and the price of the transponders. Dennison subsequently sent a mailgram to Western Union's New Jersey headquarters in which he expressed concern over the status of negotiations and urged that the parties meet again shortly to pursue the proposed agreements. On April 28, 1981, Dennison, Hermann, and Milne again traveled to New Jersey to discuss the matter. A two-and-one-half-hour discussion took place at which the terms of the option contracts were negotiated, including the number of transponders involved, the price, the payment schedule, and insurance arrangements.⁵

In late May 1981, representatives of the parties met in Oklahoma and agreed to an option contract which gave TSI an option to buy one transponder on Westar V and two transponders on Westar VI. The contract was executed in Oklahoma on May 28, 1981 and backdated to May 11, 1981. On May 29, 1981, TSI exercised its option to purchase the one Westar V transponder. The May 29 contract was executed in Delaware for tax purposes.

On June 12, 1981, Milne informed Western Union that TSI was amenable to buying any other transponders that Western Union was willing to sell. See supra note 4. As a result, meetings between the parties were held in Oklahoma on August 20 and 21 to discuss TSI's possible purchase of a second transponder on the Westar V satellite and an agreement was reached on September 25. On October 16, 1981, a second option agreement was executed in New Jersey, and on October 19, 1981, TSI exercised its option to buy the second Westar V transponder. The October 19 contract was executed in Delaware for tax purposes.

In November 1981, problems began to arise with the contracts because, according to TSI, TSI believed that the Federal Communications Commission might take some action regarding transponder sales to non-common carriers which, in turn, might preclude TSI from purchasing transponders. On December 30, 1981 and in January 1982, meetings were held between the parties in New Jersey to try to resolve the problems.

On February 9, 1982, Western Union filed this action, alleging that TSI has failed to make payments required by the May 11 contract for options to purchase two Westar VI transponders, by the May 29 contract for the purchase of one Westar V transponder, and by the October 19 contract for the purchase of a second Westar V transponder. Western Union seeks damages in excess of $14,600,000 plus interest.⁶

II. DISCUSSION

Fed.R.Civ.P. 4(e) permits a federal district court to exercise personal jurisdiction over a nonresident defendant to the extent allowed by the law of the state where the court sits. N.J.R. 4:4-4(c)(1) (1982), by which service was effected on TSI, permits service on nonresident defendants "to the uttermost limits permitted by the United States Constitution." Avdel Corp. v. Mecure, 58 N.J. 264, 268, 277 A.2d 207, 209 (1971). Thus, New Jersey's longarm statute is coextensive with the Due Process Clause of the Constitution. De James v. Magnificence Carriers, Inc., 654 F.2d 280, 284 (3d Cir.), cert. denied, ___ U.S. ___, 102 S.Ct. 642, 70 L.Ed.2d 620 (1981) (interpreting New Jersey long-arm rule); see also Carty v. Beech Aircraft Corp., 679 F.2d 1051, 1058 (3d Cir. 1982) (when state statute contains language providing that jurisdiction extends to the limits of the Constitution, the Third Circuit has pretermitted examining the precise statutory language and has focused on the due process requirement instead). The issue for the Court in this case, therefore, is whether defendant TSI may be required to defend this suit in New Jersey consistent with the concepts of fundamental fairness, reasonableness, and justice mandated by the Due Process Clause. Reilly v. P. J. Wolff & Sohne, 374 F.Supp. 775, 777 (D.N.J.1974).

A. Precedential Framework

Cases prior to 1945 had not reformulated the constitutional limits of in personam jurisdiction in response to the nation's industrial growth. 4 C. Wright & A. Miller, Federal Practice & Procedure § 1064. By the mid-twentieth century, with the advent of high speed transportation and communications, many commercial transactions touched two or more states and involved parties separated by the full continent. Modern transportation and communication had made it much less burdensome for a business to defend a suit in a state where it had transacted economic activity. See McGee v. International Life Insurance Company, 355 U.S. 220, 222-23, 78 S.Ct. 199, 200-01, 2 L.Ed.2d 223 (1957). Just as the courts had expanded their conception of the scope of interstate commerce to encompass the ever-widening streams of commerce and to accommodate the flood of economic and industrial development, see Swift & Co. v. United States, 196 U.S. 375, 398, 25 S.Ct. 276, 280, 49 L.Ed. 518 (1905) (Holmes, J., opinion of the Court) ("commerce among the States is not a technical legal conception, but a practical one, drawn from the course of business"), so the Supreme Court responded to the realities of economic activity by replacing the doctrine of personal presence within a territorial jurisdiction as enunciated in Pennoyer v. Neff, 95 U.S. (5 Otto) 714, 24 L.Ed. 565 (1877) with the more flexible, modern standard set forth in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945).

In International Shoe, the Court stated that if a defendant is not physically present within the jurisdiction of a state, he must have "certain minimum contacts with the forum such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" Id. at 316, 66 S.Ct. at 158 (citations omitted). The International Shoe Court noted that presence is not in doubt when a corporation's activities have been "continuous and systematic." Conversely, the "casual presence" of a corporate agent in the forum, or single or isolated activities within a forum on a corporation's behalf, were held to be insufficient to subject the corporation to suit on a cause of action unrelated to activities within the state. Id. at 317, 66 S.Ct. at 158.

In McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957), the Court dealt with the question of in personam jurisdiction over a nonresident corporation with contacts arising out of a single transaction with the forum state. In McGee, a Texas insurance company, which had insured a California resident but had no other contacts with California, was held amenable to a suit in California arising from the insurance contract, which the Court found to have a "substantial connection" with that State. Id. at 223, 78 S.Ct. at 201. In Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958), however, decided shortly after McGee during the same term, the Supreme Court announced certain limits to the scope of in personam jurisdiction:

The unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State .... It is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State....

Id. at 253, 78 S.Ct. at 1239. The Court has also indicated that a defendant must reasonably be able to anticipate being "haled" before the court of a particular forum in order to be amenable to suit within that jurisdiction. Kulko v. California Superior Court, 436 U.S. 84, 97-98, 98 S.Ct. 1690, 1699-700, 56 L.Ed.2d 132 (1978); Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977).

These restrictions were underscored in World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980), a products liability action in which in personam...