AGRASHELL, INC., Plaintiff,
v.
BERNARD SIROTTA COMPANY, Edwin M. Sirotta, and Milton A. Sirotta, Defendants and Third-Party Plaintiffs-Appellants,
v.
HAMMONS PRODUCTS COMPANY, Third-Party Defendant-Respondent.
No. 259.
Docket 29177.
United States Court of Appeals Second Circuit.
Argued January 5, 1965.
Decided April 6, 1965.
Rehearing Denied April 21, 1965.
Edward Halle, Garden City, N. Y. (David F. Cohen, New York City, of counsel), for defendants and third-party plaintiffs-appellants.
Lawrence C. Moore, Washington, D. C. (Damon M. Gunn, Washington, D. C., of counsel), for third-party defendant-respondent.
Before LUMBARD, Chief Judge, and WATERMAN and HAYS, Circuit Judges.
WATERMAN, Circuit Judge:
Defendants (hereinafter Sirotta), residents of New York constituting a New York partnership, bought cracked black walnut shells from the third-party defendant (hereinafter Hammons), a Missouri corporation operating under the slogan, "Our Black Walnut Goodies Are Just What They're Cracked-Up To Be." When Sirotta resold the goods, plaintiff (hereinafter Agrashell), a Delaware corporation, brought suit in the United States District Court for the Eastern District of New York, alleging that Sirotta had infringed Agrashell's patent rights. Sirotta, by leave of the court under Fed.R.Civ.P. 14(a), impleaded Hammons as a third-party defendant, alleging that Hammons had warranted the fitness of the goods for resale and had agreed to indemnify Sirotta against a patent infringement suit. The summons and complaint in the third-party action were served on Hammons in Missouri.
Hammons moved to dismiss the third-party complaint on the ground that it was not personally subject to the jurisdiction of the court. In support of the motion, Hammons submitted virtually identical affidavits by three of its officers, stating that Hammons had never maintained an agency, salesman, stock of goods, representative, or telephone listing in New York; that all goods offered or sold to Sirotta were contracted for and delivered in Missouri; and that Hammons had neither been licensed to do business in New York nor had otherwise voluntarily subjected itself to the jurisdiction of the New York courts.
In opposition to the motion, Sirotta submitted affidavits and exhibits describing in detail its dealings with Hammons relative to the purchase of the goods. The contents of these documents will be set forth subsequently. The district court declined to order a trial-type hearing on the motion but proceeded to dismiss the third-party complaint on the papers alone. Judge Bartels's careful and comprehensive opinion is reported at
The district court, citing Arrowsmith v. United Press Int'l,
A leading authority on the Federal Rules of Civil Procedure asserts:
"The general purpose of Rule 14 is to avoid two actions which should be tried together to save the time and cost of a reduplication of evidence, to obtain consistent results from identical or similar evidence, and to do away with the serious handicap to a defendant of a time difference between a judgment against him, and a judgment in his favor against the third-party defendant." 3 Moore, Federal Practice ¶ 14.04, at 501 (1964), quoted in Dery v. Wyer,
Accordingly, even without diversity of citizenship between the parties, Sirotta would have been permitted to implead Hammons in the federal courts, so long as there was subject-matter jurisdiction of Agrashell's suit against Sirotta. 3 Moore, Federal Practice ¶ 14.26; Dery v. Wyer, supra, at 807. Likewise, it is probable that even though the third-party claim did not satisfy the venue requirements for diversity actions, Sirotta would have been allowed to implead Hammons in the Eastern District court, so long as Agrashell's claim against Sirotta was properly laid there. 3 Moore, Federal Practice ¶ 14.28[2]; United States v. Acord,
In view of these doctrines, it may well be that the issue of personal jurisdiction, in the sense of territorial domain, should also be resolved by a rule fashioned especially for third-party claims. Indeed, a special rule might be peculiarly appropriate in the present case, for Sirotta's third-party claim is joined to a federal question action. However, we find it unnecessary to decide this difficult question, which was neither briefed nor argued by the parties. Even if a special rule should govern the territorial dominion of the district court over Hammons, we do not suppose that it would be more restrictive than Section 302(a)1 of the CPLR; and in this particular case Section 302(a)1 clearly determines the related issue of whether the process of the district court was properly served on Hammons in Missouri.
Even in the case of a third-party claim, process can be served only within the limits prescribed by Fed.R.Civ.P. 4. See 3 Moore, Federal Practice ¶ 14.28 [1]; Moreno v. United States,
"All process other than a subpoena may be served anywhere within the territorial limits of the state in which the district court is held, and, when authorized by a statute of the United States or by these rules, beyond the territorial limits of that state."
The principal federal statute or rule potentially authorizing service of the process of the Eastern District court on Hammons in Missouri is Rule 4(e):
"Whenever a statute or rule of court of the state in which the district court is held provides * * * for service of a summons * * * upon a party not an inhabitant of or found within the state, * * * service may * * * be made under the circumstances and in the manner prescribed in the statute or rule."
Only Section 313 of the CPLR might provide for service of a New York summons on Hammons in Missouri:
"A person domiciled in the state or subject to the jurisdiction of the courts of the state under section 301 or 302 * * * may be served with the summons without the state, in the same manner as service is made within the state * * *."
No one contends that Hammons is a domiciliary of New York or subject to the jurisdiction of the New York courts under Section 301. As for Section 302, according to our record, Sirotta relied only on subsection (a)1 in the proceedings below.1 Thus, at the end of a roundabout search, we find the same statutory provision to be dispositive of this case as did the district court.
Hammons, however, denies the applicability of Section 302(a)1. It points out that the CPLR went into effect on September 1, 1963, and that although Sirotta's third-party suit was commenced on December 17, 1963, the events on which the suit is based occurred prior to September 1, 1963. Hammons consequently argues that Sections 313 and 302 were not intended to have retroactive effect, and that to apply them retroactively would violate due process.
Hammons has neither alleged nor proved that its dealings with Sirotta were carried out in reliance on prior New York law concerning personal jurisdiction and service of process. Therefore, Sections 313 and 302 were clearly intended to cover this case, for in Simonson v. International Bank,
"[W]ith the possible exception of cases in which the acts serving as the predicate for jurisdiction under the new section are shown to have been carried out in justifiable reliance on the prior law * * *, CPLR § 302 has retroactive effect to the extent of embracing suits instituted after its effective date but based on previously accrued causes of action."
Furthermore, in the absence of such a showing, the limited retroactivity prescribed by the Court of Appeals for these procedural provisions does not violate due process. See McGee v. International Life Ins. Co.,
Section 302(a)1 of the CPLR states:
"(a) * * * A court may exercise personal jurisdiction over any non-domiciliary * * * as to a cause of action arising from any of the acts enumerated in this section, in the same manner as if he were a domiciliary of the state, if, in person or through an agent, he:
"1. transacts any business within the state."
In Gelfand v. Tanner Motor Tours, Ltd.,
"§ 302 was enacted to take advantage of New York's newly acquired constitutional power, derived from International Shoe Co. v. State of Washington [
Accordingly, in the absence of authoritative pronouncements by the New York courts indicating a narrower legislative intention, we shall assume that Section 302 is as broad as the Federal Constitution would permit it to be. Ibid.
Sirotta argues that its third-party claim against Hammons can most conveniently be tried in the same forum as Agrashell's original claim against Sirotta. This is quite true, as Professor Moore points out in the passage quoted above, and it is also true that convenience of the forum has, on occasion, been considered a factor supporting personal jurisdiction over foreign corporations. Travelers Health Ass'n v. Virginia ex rel. State Corp. Comm'n,
Sirotta contends that certain acts by Hammons preceding the performance of the sales contracts constituted a transaction of business in New York within the meaning of Section 302(a)1. It points out that Hammons solicited orders from Sirotta by mail and telephone to New York; that the contracts with Hammons were executed by Sirotta in New York; and that Hammons agreed that the principal contract between them should be interpreted in accordance with New York law. Sirotta also argues that the sales contracts were concluded in New York because the last acts necessary to their making occurred there.
In Hanson v. Denckla, supra, at 251, 253,
"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. See International Shoe Co. v. State of Washington,
* * * * * *
"The application of that rule will vary with the quality and nature of the defendant's activity, but 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, thus invoking the benefits and protections of its laws. International Shoe Co. v. State of Washington,
We fail to see in what material respect Hammons invoked the benefits and protections of New York law merely by negotiating and concluding goods contracts through the mails and by telephone with persons residing in New York. Other courts, construing similar state laws in like cases, have also found that these contacts are insufficient to give personal jurisdiction over the foreign corporation. Grobark v. Addo Mach. Co.,
Nor do we regard as decisive the fact that Hammons agreed that one of the contracts should be interpreted in accordance with New York law, or the allegation that all of the contracts were concluded in New York. The choice of law provision cannot be construed as a voluntary submission by Hammons to the personal jurisdiction of the New York courts in the absence of any express contractual understanding to that effect. Cf. Erlanger Mills, Inc. v. Cohoes Fibre Mills, Inc., supra,
Sirotta relies heavily on McGee v. International Life Ins. Co., supra. There are certain resemblances between that case and ours. In McGee, California was allowed to exercise personal jurisdiction over a Texas corporation based on a single contract insuring the life of a California resident. Here, Sirotta asks us, in effect, to allow New York to exercise personal jurisdiction over a Missouri corporation based in part on a contract indemnifying New York residents against loss. However, the differences between the cases are even more significant than their resemblances. In McGee, the Supreme Court was concerned with "an activity that the State treats as exceptional and subjects to special regulation." Hanson v. Denckla, supra, at 252,
Pursuant to the sales contracts, Hammons shipped ten truckloads of cracked black walnut shells to Sirotta in New York, over a period of about eighteen months. Sirotta alleges that these shipments were f. o. b. New York and were carried in trucks owned or leased by Hammons. If these contentions are correct, Hammons was presumably transacting business in New York within the meaning of Section 302(a)1. The risk of loss would seem to have been on Hammons while the goods were passing through New York on the way to Sirotta's place of business, and at the same time Hammons would also seem to have had a proprietary stake in the safe operation of the trucks. Accordingly, Hammons would have enjoyed the benefits and protections of New York law in an overt physical manner.
However, Hammons alleges that the goods were sold f. o. b. Missouri and were shipped in common carriers subject to Sirotta's directions. On the basis of these facts it contends that it had no responsibility for either the goods or the trucks once they left its place of business in Missouri. If these assertions are valid, Hammons cannot be reached by Section 302(a)1, for, in that event, Sirotta and the carriers, not Hammons, would have been the ones to profit by New York law. See Grobark v. Addo Mach. Co., supra (goods shipped by independent carriers); Erlanger Mills, Inc. v. Cohoes Fibre Mills, Inc., supra (goods sold f. o. b. place of shipment).
Sirotta warns us against turning this appeal on "nice or technical questions of title or property under commercial law." On the contrary, we feel that in cases arising out of contractual relationships, the rules governing amenability to suit should be reasonably clear-cut, so that the parties may predict with some certainty the jurisdictional consequences of their conduct. See MacInnes v. Fontainebleau Hotel Corp.,
Unfortunately, the exhibits submitted by Sirotta contain conflicting evidence of uncertain significance on the question of who bore the risk of loss to the goods. For example, three of Sirotta's orders read, "FOB our door, Brooklyn NY," "FOB our door," and "fob our door, Brooklyn, N.Y." On the other hand, the advertising matter sent out by Hammons quoted prices "f.o.b. Stockton, Missouri" and "f.o.b. Bolivar, Missouri," and the major contract between the parties, which governed seven of the ten shipments to New York, provided, "F.O.B. points at Purchaser's option: Stockton, Mo. * * * Bolivar, Mo. or El Dorado Springs, Mo. * * *"
The evidence on the question of who was responsible for the trucks is equally inconclusive. For instance, Edwin Sirotta deposed that in a telephone conversation at the outset of their dealings, "Mr. Hammons stated that his company had their own and rented trucks which could bring the products into New York and thus, reduce freight costs;" Sirotta later wrote Hammons in connection with the initial order, "[Y]ou are to assume all responsibility for trucking arrangements;" and on every shipment Hammons prepaid whatever trucking charges may have been incurred. On the other hand, Sirotta wrote Hammons in connection with the first order, "[W]e cannot use any trucking outfit that might violate any ICC regulations;" the major contract provided, "Seller to make and route shipments in accordance with instructions from Purchaser;" and on every occasion Sirotta ultimately paid the trucking costs.
Because all the evidence before the district court was documentary, we do not feel limited by the findings below on these factual questions. See 5 Moore, Federal Practice ¶ 52.04 (1964); Miller v. Commissioner of Internal Revenue,
The district court apparently assumes that this problem is to be resolved in the light of New York law. It is not clear whether the assumption is based on the theory that this is a diversity case governed by Erie R. R. v. Tompkins,
Reversed and remanded for further proceedings in accord with this opinion.
Notes:
Notes
On appeal, Sirotta argues for the first time and in a sketchy manner that Section 302(a)2 is also applicable. We decline to consider this contention, inasmuch as the case is being returned to the district court for further proceedings, at which time Sirotta may pursue the point if it wishes
LUMBARD, Chief Judge (concurring):
Although I would affirm the order of Judge Bartels which dismissed the third-party claim for lack of personal jurisdiction, I join in Judge Waterman's conclusion that the case be remanded for the taking of further evidence as that appears to me to be the only way to resolve the matter before us in view of our divergent views. I am in agreement with the principles of law set forth in Judge Waterman's opinion but I feel that their application to these facts should result in a finding that jurisdiction over Hammons does not exist. Therefore, I think I should add that it seems unlikely from what is already before us that any additional evidence adduced would require the district court to hold that it had jurisdiction.
HAYS, Circuit Judge (dissenting):
I believe that the court reads International Shoe Co. v. Washington,
I can see no necessity for taking further evidence on the issue of jurisdiction.