Widger Chemical Corp. v. Chemfil Corp.

• Decision Date: 29 January 1985
• Docket Number: Civ. A. No. 84-CV-1618-DT.
• Citation: 601 F. Supp. 845
• Parties: WIDGER CHEMICAL CORPORATION and Surface Treatments, Inc., Plaintiffs, v. CHEMFIL CORPORATION, Diversey Corporation, Diversey Wyandotte Corporation, and Diversey S.A. N.V., Defendants.
• Court: U.S. District Court — Western District of Michigan

601 F. Supp. 845

WIDGER CHEMICAL CORPORATION and Surface Treatments, Inc., Plaintiffs, v. CHEMFIL CORPORATION, Diversey Corporation, Diversey Wyandotte Corporation, and Diversey S.A. N.V., Defendants.

Civ. A. No. 84-CV-1618-DT.

United States District Court, E.D. Michigan, S.D.

January 29, 1985.

Ernie L. Brooks, Mark A. Cantor, Brooks & Kushman, Southfield, Mich., for plaintiffs.

Raymond E. Scott, Kevin J. Heinl, Cullen, Sloman, Cantor, Grauer, Scott & Rutherford, P.C., Detroit, Mich., for Chemfil Corp.

Paul Sherr, Birmingham, Mich., for Diversey Corp., Diversey Wyandotte, and Diversey S.A. N.V.; Allan E. Lapidus, John R. Obiala, Vedder, Price, Kaufman & Kammholz, Chicago, Ill., of counsel.

MEMORANDUM OPINION

FEIKENS, Chief Judge.

Plaintiffs, Widger Chemical Corporation and its subsidiary Surface Treatments, Inc., filed this antitrust and intentional interference with business relations action against defendants Chemfil Corporation, Diversey Corporation, Diversey Wyandotte Corporation and Diversey S.A. N.V. On November 9, 1984, a hearing was held on defendants Diversey S.A. N.V. and Diversey Corporation's motion to dismiss for want of personal jurisdiction. At that hearing, plaintiffs agreed to dismiss Diversey S.A. N.V. without prejudice. I denied Diversey Corporation's motion to dismiss. This opinion supplements that ruling.

I. BACKGROUND

Plaintiffs Widger Chemical Corporation (Widger) and its subsidiary Surface Treatments, Inc. (STI), sell specialty chemical products for treating and cleaning metals. Defendants Chemfil Corporation (Chemfil) and Diversey Corporation (Diversey) sell competing chemical products. Plaintiffs allege that Diversey and Chemfil have entered into "an overall scheme to stifle competition in certain chemical products in the domestic and foreign market ..." in violation of the Sherman Act §§ 1, 2, 15 U.S.C. §§ 1, 2 (1982). Complaint ¶ 21. Plaintiffs also claim that defendants intentionally interfered with the advantageous business relations of Widger and STI. Complaint ¶ 32. Plaintiffs allege that four acts are part of, and manifest the alleged scheme to restrain trade: First, Diversey and Chemfil entered into a license agreement to distribute Chemfil products through Diversey's subsidiaries located throughout the world. Second, Chemfil obtained a preliminary injunction against Widger and STI in a lawsuit filed in Oakland County Circuit Court (Chemfil v. Surface Treatments, Inc., No. 82-252363 (Feb. 16, 1984)). Chemfil filed suit against Widger, STI, and others, alleging, in part, theft of trade secrets and proprietary information. Widger and STI were enjoined from selling or licensing certain confidential formulas to third persons. Third, plaintiffs allege that representatives of Widger and Chemfil misrepresented the nature of the Oakland County proceedings as a suit for illegally breaking a patent to the Michigan Office of Economic Development (OED) in Belgium. That office promotes Michigan businesses throughout Europe. As a result of the misrepresentation, plaintiffs argue, OED refused to represent Widger. Finally, plaintiffs argue that while Inmont Corporation was negotiating for the purchase of Widger, counsel for Chemfil sent a letter to Inmont including a "copy of the Preliminary Injunction entered by the Court for your information." The preliminary injunction entered by the Court, however, differed from the one sent to Inmont. Diversey moves to dismiss, arguing that it has insufficient contacts with Michigan, and therefore, it is not subject to this Court's jurisdiction.

Diversey (defendant) pleads that it is a Canadian corporation which has never sold any products, been qualified or registered to do business, or maintained an office, telephone listing, or bank account in Michigan. The license agreement Diversey entered into with Chemfil concerns distribution of Chemfil products outside of the United States. Defendant further pleads that no Diversey shareholder, director, employee or agent has ever lived in Michigan, nor has Diversey ever owned any real or personal property located in Michigan. (Affidavit of John Pick, Senior Vice-President of Diversey). The license agreement between Diversey and Chemfil, however, was negotiated in Troy, Michigan, and by its own terms, is subject to the laws of Michigan. Pursuant to that license, Diversey makes payments to Chemfil in Michigan. (Deposition of Malcolm Pemberton). I must decide whether these contacts suffice for assertion of in personam jurisdiction over Diversey.

II. DISCUSSION

The in personam jurisdictional reach of a federal court hearing a federal question case, such as this one, may be determined by the law of the state in which the court sits. Southern Machine Co. v. Mohasco Industries, Inc., 401 F.2d 374, 376 n. 2 (6th Cir.1968); Mad Hatter, Inc. v. Mad Hatters Night Club Co., 399 F.Supp. 889, 890 (E.D.Mich.1975). The Michigan long-arm statute, Mich.Comp.Laws Ann. § 600.715 (West 1981), provides in part:

The existence of any of the following relationships between a corporation or its agent and the state shall constitute a sufficient basis of jurisdiction to enable the courts of record of this state to exercise limited personal jurisdiction over such corporation and to enable such courts to render personal judgments against such corporation arising out of the act or acts which create any of the following relationships:

(1) The transaction of any business within the state.

(2) The doing or causing any act to be done, or consequences to occur, in the state resulting in an action for tort.

This statute has been interpreted to reach to the extent permissible under the due process clause. Williams v. Garcia, 569 F.Supp. 1452, 1454 (E.D.Mich.1983); Chrysler Corp. v. Traveleze Industries, Inc., 527 F.Supp. 246, 249 (E.D.Mich.1981); Schneider v. Linkfield, 389 Mich. 608, 209 N.W.2d 225 (1973); Sifers v. Horen, 385 Mich. 195, 188 N.W.2d 623 (1971). I find that either subsection of the long-arm statute cited above can be applied constitutionally to obtain in personam jurisdiction over Diversey.

Where a state's long-arm statute reaches to the extent permissible under the due process clause, the relevant inquiry is whether exercise of personal jurisdiction is constitutional. Southern Machine, 401 F.2d at 377-78. The United States Supreme Court has articulated the due process limitations on obtaining personal jurisdiction over non-resident defendants in three cases: Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958); McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957); International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Based on this line of cases, the United States Court of Appeals for the Sixth Circuit articulated three criteria for determining the limits on in personam jurisdiction based on a single act¹:

First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the forum state. Second, the cause of action must arise from the defendant's activities there. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable.

Southern Machine, 401 F.2d at 381. See also Welsh v. Gibbs, 631 F.2d 436, 439-40 (6th Cir.1980), cert. denied, 450 U.S. 981, 101 S.Ct. 1517, 67 L.Ed.2d 816 (1981).

Initially, I note that the burden of establishing jurisdiction is on plaintiff. Weller v. Cromwell Oil Co., 504 F.2d 927 (6th Cir.1974). This burden, however, is relatively slight, and the Court must consider the pleadings and affidavits in the light most favorable to plaintiff. Welsh v. Gibbs, 631 F.2d 436, 439 (6th Cir.1980), cert. denied, 450 U.S. 981, 101 S.Ct. 1517, 67 L.Ed.2d 816 (1981); Williams v. Garcia, 569 F.Supp. 1452 (E.D.Mich.1983). I now turn to consideration of each part of the test for establishing personal jurisdiction over defendant.

First, defendant has purposefully availed itself of the privilege of acting or causing consequences in Michigan. Defendant entered into a contract with a resident Michigan corporation, which alone, may satisfy the requirement of acting or causing consequences in the forum. See Chrysler Corp. v. Traveleze Industries, Inc., 527 F.Supp. 246, 250; Microelectronic Systems Corp. v. Bamberger's, 434 F.Supp. 168, 170-71 (E.D.Mich.1977). In addition, defendant negotiated this agreement, which by its terms is subject to Michigan law, in Troy, Michigan. See Health Care Industries, Inc. v. Logan Park Care Center, Inc., 573 F.Supp. 360 (S.D.Ohio 1983) (Defendant purposefully availed itself of the privilege of acting in Ohio because "defendant was the one to initially contact plaintiff in Ohio, and several meetings to negotiate the contract took place between the parties, in Ohio ...."). Diversey also sent at least two letters to Chemfil, and makes periodic payments to Chemfil under the license agreement. Thus, defendant has purposefully "availed itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protection of its laws." Hanson v. Denckla, 357 U.S. at 253, 78 S.Ct. at 1239.

Second, plaintiffs' antitrust and intentional interference with advantageous business relations claims arise out of defendant's activities in Michigan. Specifically, plaintiffs allege that the license agreement between Chemfil and Diversey is part of an overall scheme to restrain trade. As evidence of this scheme, plaintiffs cite a November 6, 1981, letter from Diversey's Vice-President for Marketing to Chemfil's President indicating that the parties would meet "to map out their strategy for introducing Chemfil technology internationally." It is this strategy, of which the license is a part, which plaintiffs allege restrains trade.

Defendant argues, however, that plaintiffs' causes...