HAROLD HEINS
vs.
WILHELM LOH WETZLAR OPTICAL MACHINERY GMBH & CO. KG.
Appeals Court of Massachusetts, Worcester.
Present: PERRETTA, CUTTER, & WARNER, JJ.
William D. Jalkut for the plaintiff.
Patricia L. Kelly for the defendant.
WARNER, J.
The plaintiff appeals from a judgment entered in the Superior Court, pursuant to Mass.R.Civ.P. 54(b),
The defendant is a West German corporation which designed and manufactured an optical lens grinding machine purchased by the plaintiff's employer, a Massachusetts corporation. The plaintiff, on theories of negligent design and manufacture and breach of warranty, sought damages for injuries sustained by him while setting up the machine in Sturbridge, Massachusetts.
On the defendant's motion to dismiss under rule 12(b)(2), the parties submitted affidavits, answers to interrogatories and excerpts of the deposition testimony of the plaintiff. After argument, the judge filed a memorandum of decision and order and allowed the motion.
As he did before the Superior Court, the plaintiff argues on appeal that assertion of jurisdiction is authorized by certain provisions of our long arm statute (G.L.c. 223A) and is consistent with basic due process requirements. In particular, as to the statutory ground, the plaintiff says that the exercise *16 of personal jurisdiction over the defendant is proper under either of the following two provisions of G.L.c. 223A, § 3, as amended by St. 1969, c. 623: "A court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a cause of action in law or equity arising from the person's (a) transacting any business in this commonwealth; [or] ... (d) causing tortious injury in this commonwealth by an act or omission outside this commonwealth if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in this commonwealth."
"General Laws c. 223A, § 3 cannot authorize jurisdiction which is constitutionally unacceptable, even though the fact pattern asserted in support of jurisdiction apparently satisfies the statute's literal requirements. Likewise, G.L.c. 223A, § 3, asserts jurisdiction over the person to the constitutional limit [see `Automatic' Sprinkler Corp. v. Seneca Foods Corp.,
1. The plaintiff first contends that his cause of action arises out of the defendant's transaction of business in Massachusetts and, therefore, personal jurisdiction attached under G.L.c. 223A, § 3(a). The focus of the plaintiff's argument, as well as of the defendant's, is blurred by a mix of considerations relevant to the statutory standard and those relevant to due process requirements. See Good Hope Indus., supra at 6-7, and cases cited; Bond Leather Co. v. Q.T. Shoe Mfg., Co.,
The facts, as found by the judge and supplemented by uncontroverted statements in the materials before her, which relate to the defendant's transaction of business in Massachusetts are as follows. The defendant is a West German corporation with a principal place of business in West Germany, engaged in the design, manufacture and sale of optical machinery. Sales of the defendant's machines in the United States are accomplished in the following manner. The defendant sells its machines outright to Loh Optikmaschinen, a Swiss corporation with a principal place of business in Switzerland which manufactures and trades in optical machinery. Loh Optical Machinery, Inc. (Loh Optical), an Illinois corporation with a principal place of business in Illinois, is the exclusive distributor of the defendant's machines in the United States. Loh Optical purchases machines directly from Loh Optikmaschinen for resale to United States customers. The defendant has no control over or ownership interest in Loh Optical. The defendant does not have any control over the marketing, price or sales of its machines in the United States.[1]
The plaintiff's employer inquired of Loh Optical regarding purchase of the machine which allegedly caused the plaintiff's injuries. The plaintiff and another employee made the recommendation to purchase the machine after dealing exclusively with one Hans Mack, the president of Loh Optical, who visited *18 Massachusetts to discuss the purchase. The machine was delivered to the plaintiff's employer in Sturbridge in July of 1982.[2]
On these facts, the plaintiff has failed to sustain his burden of showing a rational nexus between his cause of action and the transaction of any business in Massachusetts by the defendant within the literal meaning of G.L.c. 223A, § 3(a). See Good Hope Indus., supra at 6-7. Compare Nichols Associates, Inc. v. Starr,
2. We turn to consideration of the plaintiff's claim that he has established sufficient facts to support personal jurisdiction under G.L.c. 223A, § 3(d). There is no dispute that the requirement of the first prong of clause (d) has been met, namely, that the plaintiff has alleged a tortious injury in Massachusetts arising out of the claimed negligent design and manufacture of the optical grinding machine in West Germany.
We recite undisputed facts relevant to the additional statutory conditions which permit assertion of personal jurisdiction in an action for compensation for such an injury, namely, "if [a defendant] regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in this commonwealth." G.L.c. 223A § 3(d). During the seven-year period from 1977 through 1983 (records were not available for prior periods), an employee (three in all) of the defendant made eight visits (in the years 1977, 1978, 1979, 1981 and 1983, covering a total of eleven days) to companies located in Massachusetts. Five of the visits were for the purpose *20 of discussing delivered machines, two were "courtesy visits" to discuss a particular system manufactured by the defendant, and one was to discuss that system and "the market situation in the opthalmic [sic] field." Two of the visits were made, in 1983, by the defendant's managing director after the date, August 11, 1982, of the plaintiff's injuries. During almost all of these eight Massachusetts visits to "customers or potential customers" (so described in the defendant's answers to interrogatories), the defendant's employee attempted to sell the defendant's products.
The machine in question was purchased by the plaintiff's employer for about $56,000.00. The employer had previously bought three or four machines manufactured by the defendant. At a Massachusetts plant to which the plaintiff had been referred by Hans Mack, the plaintiff saw "dozens" of machines manufactured by the defendant.
Passing the question whether the defendant's visits and solicitations could be considered as regularly doing or soliciting business or as a persistent course of conduct within the literal meaning of clause (d) of G.L.c. 223A, cf. Gunner v. Elmwood Dodge, Inc.,
The Superior Court judge concluded that, as the defendant sold its machines to Loh Optikmaschinen, the defendant did not derive substantial revenue from goods used in Massachusetts. That reasoning ignores economic reality and, for purposes of statutory construction, elevates form over substance.[4] The *21 evidence of the sale price of the machine in question and the presence of many others in Massachusetts permits the inference that the defendant derives substantial revenue from the use of its machines here.[5]
3. We now consider whether the assertion of jurisdiction over the defendant would offend due process requirements. "The Due Process Clause protects an individual's liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful `contacts, ties, or relations.' International Shoe Co. v. Washington, 326 U.S. [310], 319 [1945]. By requiring that individuals have `fair warning that a particular activity may subject them to the jurisdiction of a foreign sovereign,' Shaffer v. Heitner,
"Where a forum seeks to assert specific jurisdiction[[6]] over an out-of-state defendant who has not consented to suit there, this `fair warning' requirement is satisfied if the defendant has `purposefully directed' his activities at residents of the forum, Keeton v. Hustler Magazine, Inc.,
*23 In World-Wide Volkswagen, the Court held that the "foreseeability" of persons who purchased an automobile in New York being involved in an accident in Oklahoma was an insufficient basis to support the exercise of special jurisdiction by an Oklahoma State court over the New York retailer and wholesale distributor in a products liability action where the defendants had no contacts whatever with Oklahoma. Citing Hanson v. Denckla,
The Court went on, however, to address a stream-of-commerce theory of specific personal jurisdiction which had been previously recognized by lower courts. See 4 Wright & Miller, Federal Practice and Procedure § 1067, at 283-290 (2d ed. 1987), and the cases there discussed. "This is not to say, of course, that foreseeability is wholly irrelevant. But the foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum State. Rather, it is that the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there."
"When a corporation `purposefully avails itself of the privilege of conducting activities within the forum State,' Hanson v. Denckla,
In Asahi Metal Indus. Co. v. Superior Court,
*25 "[T]he constitutional touchstone remains whether the defendant purposefully established `minimum contacts' in the forum State." Burger King Corp. v. Rudzewicz,
There is no question on the facts presented that the defendant was aware that its products had been purchased by Massachusetts customers for use here. The sale of the machine in question was not an isolated occurrence. There were "dozens" of the defendant's machines in one Massachusetts plant and three or four in the plaintiff's employer's place of business prior to the purchase of the machine in question. While the sales of the defendant's products may have been accomplished indirectly, the defendant also acted directly to serve the Massachusetts market. The defendant sent its employees to Massachusetts to visit existing or prospective customers at three different companies to provide advice on delivered machines and to cultivate a market for the defendant's products. The defendant derived substantial revenue from its products used in Massachusetts. Cf. World-Wide Volkswagen v. Woodson,
The remaining inquiry is whether, considering defendant's minimum contacts along with other factors, the assertion of specific personal jurisdiction over the defendant would comport with "fair play and substantial justice." International Shoe Co. *26 v. Washington,
The defendant has made no argument that it would be unduly burdened by having to defend the plaintiff's suit in Massachusetts. In the past, the defendant has sent its representatives, including its managing director, here to visit existing and prospective customers in order to advise and to solicit new business. Many of the defendant's machines are located in Massachusetts. The allegedly defective machine was located here, and the plaintiff's injuries were sustained here. It is likely that witnesses to the incident and medical witnesses are located in Massachusetts. It is plain that jurisdiction in the Massachusetts courts serves the interest of the plaintiff in obtaining convenient and efficient relief. The only alternative which would seem open to the plaintiff would be to submit to the jurisdiction of a foreign country's dispute resolution mechanism and choice of law rules. On the record before us, economic considerations in prosecuting and defending any action tip heavily in favor of the plaintiff. Finally, Massachusetts has a strong expressed interest in "furthering fundamental substantive social policies" which have shaped our rules of law governing products liability actions.[9] Thus, we conclude, the assertion of specific personal *27 jurisdiction over the defendant in this case would be harmonious with fair play and substantial justice.
4. In summary, we hold that (1) the literal requirement of the long arm statute that the defendant "derive[] substantial revenue from goods used ... in this commonwealth," G.L.c. 223A, § 3(d), has been satisfied, and (2) the "minimum contacts" of the defendant with Massachusetts are, when balanced with other factors, sufficient to permit the assertion of specific personal jurisdiction over the defendant under the due process clause.
Judgment reversed.
NOTES
Notes
[1] The defendant does not advertise its products or employ agents or salesmen to solicit business in the United States; it does not pay Federal or Massachusetts income taxes; it owns no property in Massachusetts; it is not registered or qualified to do business in Massachusetts; and it maintains no banking relations here.
[2] The plaintiff cannot avail himself of his affidavit statement that the machine was shipped directly from West Germany, as the defendant controverts that assertion.
[3] The long arm statute has "implicit constitutional constraints." Good Hope Indus.,
[4] In his affidavit, the managing director of the defendant said, among other things: "Insofar as orders are filled in the United States of America, delivery is made F.O.B. German border and exclusively to Loh Optikmaschinen.... Upon delivery of the products to Loh Optikmaschinen, Switzerland, ownership and all of the rights and obligations arising therein are transferred to Loh Optikmaschinen, Switzerland, in accordance with agreements." In the defendant's answers to interrogatories the eight visits to Massachusetts were described as having been made to "customers or potential customers." The plaintiff might have productively probed the relationship between the defendant and Loh Optikmaschinen and the sequence of orders and sales.
[5] The defendant makes no argument that the sales of its machines in Massachusetts did not produce "substantial revenue" Rather, it argues that it is shielded from attribution of that revenue by its arrangements with Loh Optikmaschinen. The substantial revenue test in the Massachusetts long arm statute is drawn from the Uniform Interstate and International Procedure Act § 1.03(a)(4), 13 U.L.A. 361-362 (Master ed. 1986 ed.). Courts constructing similar provisions in other State statutes have recognized the susceptibility of the test to both qualitative (ratio of local revenue to total revenue) and quantitative (absolute) approaches. See and compare Founding Church of Scientology v. Verlag,
[6] "[W]hen a State exercises personal jurisdiction over a defendant in a suit arising out of or related to the defendant's contacts with the forum, the State is exercising `specific jurisdiction' over the defendant." Helicopteros Nacionales de Colombia, S.A. v. Hall,
[7] The contours of due process requirements for the exercise of personal jurisdiction over a nonresident defendant historically have been shaped from considerations of the limitations of federalism. See International Shoe Co. v. Washington, supra at 317; World-Wide Volkswagen Corp. v. Woodson, supra at 291-294. The Supreme Court has recently noted, however, that "[a]lthough [due process] protection operates to restrict state power, it `must be seen as ultimately a function of the individual liberty interest preserved by the Due Process Clause' rather than as a function `of federalism concerns.'" Burger King Corp. v. Rudzewicz, supra at 472 n. 13, quoting from Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee,
[8] It is worth noting that in the Asahi Metal Indus. case, the plaintiff settled his products liabilities claims against multiple defendants and the only action which remained to be resolved by the California State court was an indemnity claim by a Taiwanese corporation against Asahi, a Japanese corporation. The application of California law to that dispute was, of course, in substantial doubt.
[9] "The Legislature has made the Massachusetts law of warranty congruent in nearly all respects with the principles [strict liability] expressed in Restatement (Second) of Torts § 402(A) (1965)." Back v. Wickes Corp.,
"On whatever theory, the justification for the strict liability has been said to be that the seller, by marketing his product for use and consumption, has undertaken and assumed a special responsibility toward any member of the consuming public who may be injured by it; that the public has the right to and does expect, in the case of products which it needs and for which it is forced to rely upon the seller, that reputable sellers will stand behind their goods; that public policy demands that the burden of accidental injuries caused by products intended for consumption be placed upon those who market them, and be treated as a cost of production against which liability insurance can be obtained; and that the consumer of such products is entitled to the maximum of protection at the hands of someone, and the proper persons to afford it are those who market the products." Restatement (Second) of Torts § 402A comment c (1965).