Borschow Hospital & Medical Supplies, Inc. v. Burdick-Siemens Corp.

143 F.R.D. 472, 1992 U.S. Dist. LEXIS 15669, 1992 WL 290022
District Court, D. Puerto Rico·Decided October 6, 1992·No. Civ. No. 90-1379(PG)·Published·Cited by 21 cases

Opinion

OPINION AND ORDER

PEREZ-GIMENEZ, District Judge.

I. Introduction

Before this Court is an issue of first impression in this Circuit: the propriety of service of process by mail on a non-resident, foreign defendant pursuant to section 10(a) of the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters (“the Hague Convention or Convention”). This is an issue that has caused considerable controversy and disagreement, pitting the Second against the Eight Circuit and eliciting a similar response from dozens of courts across the nation. Neither this Court nor the First Circuit has addressed the issue. As justice cannot thrive in a jurisprudence of doubt,1 this Court decides the issue today.

Also explored in this decision is a familiar but slippery question: the outer boundaries of the Fourteenth Amendment requirement that a court satisfy notions of fair play and substantial justice before jurisdiction is asserted over a foreign defendant who enjoys arguably tenuous contacts with the forum. This issue is studied within the framework provided by the recent pronouncements of the First Circuit in Donatelli v. National Hockey League, 893 F.2d 459, 462 (1st Cir.1990); United Electric Workers v. 163 Pleasant Street Corp., 960 F.2d 1080, 1089 (1st Cir.1992). These decisions serve as beacons of light in that no-man’s land which borders on the outer reaches of in personam jurisdiction.

II. Nature of the Case

Pursuant to diversity jurisdiction conferred by 28 U.S.C. § 1331, Borschow Hospital and Medical Supplies, Inc. (“Borschow”) brings an action against SiemensBurdick (formerly Burdick Corporation) and Siemens-Elema AB (“Siemens”) for termination of an exclusive distributorship agreement in violation of local law 75 of June 24, 1964, as amended, 10 Laws of Puerto Rico Annotated (L.P.R.A.) § 278 et seq. (Law 75). Defendants have filed a series of motions and memoranda in support thereof, seeking to quash service on both Burdick and Siemens as improper and asserting that this Court lacks personal jurisdiction over Siemens. Responding in kind, plaintiff submits a barrage of memoranda in support of its contention that both service and jurisdiction are proper.

III. Factual Background

The complaint states that plaintiff, Borschow — a corporation duly organized in and registered pursuant to the laws of Puerto Rico — entered into an exclusive distributorship agreement with Burdick for the distribution of medical equipment in Puerto Rico [475]*475and the Virgin Islands on or about 1975 (“1975 Agreement”).

According to Borschow, the 1975 Agreement was later modified in 1985, following the purchase of Burdick by Kone Company, a Swedish Corporation in 1984. The agreement remained in effect until 1989, when Siemens acquired Burdick “... with full knowledge [of] the obligations of the exclusive Dealership [agreement] ...,” see Ver. Compl., If 10. In June of 1989, Siemens and Burdick terminated the agreement, allegedly awarding the same to another local distributor, Mario Pelegrina, Inc.

Borschow identifies these facts as evidence of a concerted effort on the part of Burdick and Siemens to prevent Borschow from reaping the benefits of “an extremely healthy market [ ] created [ ] in Puerto Rico and the Virgin Islands for the Burdick line.” Ver.Comp. II13. In support of this generalized assertion, Borschow claims that sales of Burdick products increased to 100,000.00 from 10,000.00 a year, with an accompanying considerable good will. Id. All counted, Borschow prays for 1.275 million dollars in damages and attorney fees. Id., Ull.2

IV. Procedural Background

Borschow sought service of process by the publication of an edict in a local newspaper of general circulation and the sending of a copy of the Summons and Complaint to the last known address of Burdick and Siemens, all in apparent compliance with the requirements of local Rules 4.5 and 4.7 of the Puerto Rico Rules of Civil Procedure. See 32 L.P.R.A, App.R. 4.5 and 4.7. This Court ordered publication of the edict and Borschow sent copies of the summons and complaint by mail to the last known address.

The response by Siemens was as swift as it was deadly. On July 5,1990, it entered a special appearance for purposes of quashing service of process or, in the alternative, dismissing for lack of personal jurisdiction. In essence, Siemens asserted that service of process under Rules 4.5 and 4.7, violated the Supremacy Clause of the Constitution because service on a foreign defendant (as opposed to a non-resident defendant) was preempted by the Hague Convention, to which both the United States and Sweden are signatories.

In the alternative, Siemens argued that personal jurisdiction was lacking. In support of this assertion, Siemens underscored that it does not do business, have an office, or have an agent in the United States or Puerto Rico, nor is authorized to do business in this lair. Siemens—citing Escudé Cruz v. Ortho Pharmaceutical Corp., 619 F.2d 902, 905 (1980),—further argued that even if the Court found it to be the parent company of Burdick, such relationship, without more, was not sufficient to confer jurisdiction.

Burdick followed a similar, though watered down, strategy. In an abbreviated motion for dismissal, Burdick argued that the Summons and Complaint was defective in two respects. First, the Summons incorrectly stated that an answer to the Complaint had to be filed within twenty (20) rather than the required thirty (30) days. Second, and in a more serious vein, Burdick argued that the summons was addressed to a Burdick-Siemens corporation, an entity which did not exist.

After briefing on the issues by both parties, this Court entered a margin order quashing service of process on defendant Siemens. The validity of service and personal jurisdiction over Burdick was left unresolved.

Undeterred by this temporary setback, Borschow sought service of process on Siemens pursuant to Rule 4(i)(l)(D) of the Federal Rules of Civil Procedure and section 10(a) of the Hague Convention. According to Borschow, both provisions, jointly read, stand for the proposition that service over a non-resident foreign defendant is valid by mailing a copy of the summons [476]*476by international mail, return receipt requested.

Siemens vigorously objected to service, arguing this time that service by mail is not authorized under the Hague Convention. Siemens also re-states its earlier position that this Court lacks in personam jurisdiction to adjudicate the claims brought against it. Burdick renewed its motion to dismiss for improper service of process. The parties briefed the points extensively, submitting various rounds of memoranda.

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Borschow Hospital & Medical Supplies, Inc. v. Burdick-Siemens Corp., 143 F.R.D. 472, 1992 U.S. Dist. LEXIS 15669, 1992 WL 290022 (prd 1992).

143 F.R.D. 472 (Borschow Hospital & Medical Supplies, Inc. v. Burdick-Siemens Corp.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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