Westphal v. Stone Manufacturing Co.

• Decision Date: 10 November 1969
• Docket Number: Civ. A. No. 3567.
• Parties: Donald WESTPHAL and Cheryl Ann Westphal, P.P.A. v. STONE MANUFACTURING CO.
• Court: U.S. District Court — District of Rhode Island

305 F. Supp. 1187

Donald WESTPHAL and Cheryl Ann Westphal, P.P.A. v. STONE MANUFACTURING CO.

Civ. A. No. 3567.

United States District Court D. Rhode Island.

November 10, 1969.

Leonard Decof, Providence, R. I., for plaintiffs.

John T. Keenan, Providence, R. I., for defendant.

OPINION

PETTINE, District Judge.

This is a tort action for damages resulting from burns received by the plaintiff, a citizen of the State of Rhode Island, when clothes she was wearing ignited into a fire. The defendant manufacturer is a foreign corporation with its principal place of business in South Carolina. Jurisdiction is alleged on the basis of 28 U.S.C. § 1332, that is diversity of citizenship, and an amount in controversy exceeding $10,000 exclusive of interest, costs and fees.

The defendant has moved to dismiss on five separate grounds all of which really concern defendant's "contacts" with Rhode Island for the purposes of in personam jurisdiction, service of process and venue.

FACTS

The defendant manufactured clothing at its principal place of business in Greenville, South Carolina and sold the same to a retail store in Rhode Island where, in turn, it was purchased for the plaintiff's use. The answers to the plaintiffs' interrogatories establish that the defendant's contacts in Rhode Island revolve around the solicitation of business in this state since 1961 by a commission sales agency that maintained an office in Massachusetts. The dollar volume of such business averaged $126,647 in 1961; $151,486 in 1962; $165,802 in 1963 and $153,319 in 1964. All orders, shipments and billing of goods was on a direct basis between the defendant in South Carolina and the various retail stores in Rhode Island. The orders were forwarded from Rhode Island customers directly to the defendant in Greenville, South Carolina for acceptance or rejection and all shipments were mailed and billed from the defendant to these various Rhode Island customers, who in turn paid the defendant directly.

Stone Manufacturing Co. advertised through a national apparel trade publication and in addition apparently mailed brochures containing order slips and styles twice yearly to its customers; advertisements placed by suppliers using the trade name (which trade name was on all the articles shipped into Rhode Island) may have appeared in national magazines.

The plaintiff argues that the threshold requirement of necessary minimum contacts with the State of Rhode Island at the time of the alleged incident so as to subject the defendant to suit in this court has been satisfied. The defendant on the other hand urges that the question of whether or not the defendant had the necessary minimum contacts with the State of Rhode Island is not the sole controlling ground for dismissal and is not determinative in deciding whether or not venue is proper.

As conceded and stipulated by the parties, the defendant has never been licensed to do business in Rhode Island; nor maintained any facility for conducting business in this state; nor employed or retained officers or agents in Rhode Island.

DISCUSSION

The question whether the defendant was "doing business" within the state and therefore "present" for jurisdictional and venue purposes requires the joint consideration of 28 U.S.C. § 1391(c) and the state's so-called "long arm statute" § 9-5-33 Rhode Island General Laws 1956 as amended.¹

In both, the determinative point can only be resolved by an analysis of the defendant's factual contacts with the forum state. These must decide whether the corporation was "doing business" in the state and so was "present" for jurisdictional and/or venue purposes. However, is such a decision made according to federal law or is the law of the state all controlling?² "It is the better rule and is now virtually settled that federal law governs the question of `doing business' for venue purposes under 28 U.S.C. § 1391(c)."³ Doing business for jurisdictional purposes should be decided in accordance with the law of the state wherein the court is sitting.⁴

The measure of difficulty and confusion such a question has presented in other forums is not of significance in this district.

The Chief Judge of this court in DelSesto v. Trans-World Airlines, Inc., 201 F.Supp. 879 (D.R.I.1962) stated:

"(T)he legislature of Rhode Island has chosen to exercise jurisdiction over foreign corporations up to the constitutional limitation."

The Rhode Island Supreme Court has reaffirmed this position in Conn v. ITT Aetna Finance Company et al., 252 A.2d 184, 186, referring to the Rhode Island statute it said,

"* * * That act made foreign corporations and nonresidents individuals having the necessary `minimum contacts' with this state amenable to the jurisdiction of our courts subject only to whatever limitations might be imposed by the constitution or laws of the United States; in substance and in effect, it empowers our courts * * * `to exercise jurisdiction over foreign corporations up to the constitutional limitation.'" (citing DelSesto v. Trans World Airlines, Inc., supra)

The Rhode Island legislature adopted the "long arm statute" in harmony with the trend of the minimum contacts concept as enunciated in McGee v. International Life Ins. Co., 355 U.S. 220, 222, 78 S.Ct. 199, 2 L.Ed.2d 223. Quoting from International Shoe v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95:

"* * * 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.'"

The Rhode Island Supreme Court in Conn v. ITT Aetna Finance Company et al., supra, 252 A.2d at page 187, in establishing discernible guidelines for determining such minimum contacts looked to the permissible constitutional limits in stating: "At best these are illusive phrases. `Traditional notions of fair play and substantial justice' as a measuring rod stands on the same footing as `fundamental fairness;' and `fundamental fairness' as a test `* * * is one on a par with that of shocking the conscience of the Court.' Black, J., concurring in Duncan v. Louisiana, 391 U.S. 145, 169, 88 S.Ct. 1444, 20 L.Ed.2d 491. Given such an ambulatory grant of power, the task of determining when an exercise of jurisdiction over a nonresident is permissible and when impermissible.

`* * * will require an evolutionary process rather than a quick definitive statement, as these terms involve subjective judgments that must be based upon a multitude of variant factors as they are presented in a multitude of cases. The existence or non-existence of the necessary `minimum contacts' to justify the upholding of personal jurisdiction over foreign corporations under the Fourteenth Amendment as interpreted in the International Shoe Company case must obviously be worked out with reference to the facts of a particular case rather than in a statement of dogmatic rules of all-inclusive principles.' Velandra v. Regie Nationale Des Usines Renault, 6 Cir., 336 F.2d 292, 295.

It is within the frame of this process that we inquire whether * * * had sufficient `minimum contacts' with this state to permit our courts to exercise in personam jurisdiction over them."

So it would seem that in this district "doing business" in 1391(c) for venue purposes under the federal standard and necessary "minimum contacts" for amenability to service of process within the frame work of constitutional due process as developed by state case law should be equivalents.

It appears to this court that such uniformity is desirable and is best continued by adopting Professor Moore's approach, "* * * and, although the matter is not free from doubt, and there is very respectable contra authority, we believe that if a corporation is amenable to service of process it should be held to be `doing business' for venue purposes. In the borderline situation, a court must look to the particular facts of each case and examine the nature of the corporation's contacts with the state, in relation to the suit that is being pressed against it. * * * if it is not unfair to subject the corporation to the court's jurisdiction by service of process, it seems wise and not unfair to hold that there is a proper venue, particularly when the case can be transferred to another venue, if convenience warrants."⁵

Adopting this procedure, it must now be determined whether or not the facts of the case at bar meet the test of "minimum contacts" for the purpose of in personam jurisdiction.

The cause of action arose out of activities totally connected with this district. From 1961 on, there has been a continuing and systematic contact with Rhode Island as represented by substantial sales to thirteen retail stores located in seven different cities or towns of this state. There was a systematic contact with Rhode Island through the shipping, mailing and billing of goods from the defendant directly to these customers; and the further cultivation of this market by mailing brochures to all customers with order slips twice yearly. In the five years prior to the accident, the defendant sold more than $750,000 worth of merchandise to Rhode Island retailers.⁶ It reaps substantial financial rewards from the State of Rhode Island. This conduct cannot be termed a passing interest, occasional or sporadic.

"* * * 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.'"⁷

It cannot be questioned that defendant has substantial connection with the State of Rhode Island to afford the State jurisdiction under the statute.

In McGee v. International Life Insurance Co., supra, there was...