U.S. Sprint Communications Co. Ltd. Partnership v. Mr. K's Foods, Inc.

624 N.E.2d 1048, 68 Ohio St. 3d 181

Opinions

Weight, J.

The question before us today is whether an Ohio court may exercise personal jurisdiction over a foreign corporation in order to adjudicate seventeen separate but similar causes of action, when only six of those causes of action arose in Ohio. For the reasons stated below we reverse the court of appeals and hold that the trial court had an adequate basis upon which to properly assert in personam jurisdiction over the defendant for all seventeen causes of action.

When determining whether a state court has personal jurisdiction over a foreign corporation the court is obligated to engage in a two-step analysis. First, the court must determine whether the state’s “long-arm” statute and applicable civil rule² confer personal jurisdiction, and, if so, whether granting jurisdiction under the statute and the rule would deprive the defendant of the right to due process of law pursuant to the Fourteenth Amendment to the United States Constitution. Fallang v. Hickey (1988), 40 Ohio St.3d 106, 532 N.E.2d 117; Kentucky Oaks Mall Co. v. Mitchell’s Formal Wear, Inc. (1990), 53 Ohio St.3d 73, 559 N.E.2d 477.

I

In ruling that the trial court did not have personal jurisdiction over eleven of seventeen causes of action, the court of appeals based its decision on Ohio’s “long-arm” statute, R.C. 2307.382. That law defines the specific activities for which a foreign corporation may become subject to a judgment in personam, in an Ohio court. It states in relevant part:

“(A) A court may exercise personal jurisdiction over a person who acts directly or by an agent, as to a cause of action arising from the person’s:

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“(1) Transacting any business in this state;

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“(C) When jurisdiction over a person is based solely upon this section, only a cause of action arising from acts enumerated in this section may be asserted against him.”

Mr. K’s Foods, relying on R.C. 2307.382(C), argued below that if a court bases personal jurisdiction on R.C. 2307.382(A)(1), then it may only entertain those causes of action that arise from the company “[transacting any business” in Ohio. While Mr. K’s maintained the company has no responsibility for the unpaid telephone bills of any of its distributors, it argued that, in any event, the trial court could only exercise jurisdiction over the six Ohio accounts totaling $6,194.11.³ Mr. K’s claimed further that because the remaining eleven accounts had no connection with Ohio and therefore did not “arise from” Mr. K’s “[transacting any business” in Ohio, the court improperly asserted jurisdiction and thus the default judgment with respect to these accounts is void ab initio. Consequently, Mr. K’s urged, $149,113.47 of U.S. Sprint’s $155,307.58 default judgment award must be set aside. We disagree.

Under R.C. 2307.382(A)(1), a foreign corporation submits to the personal jurisdiction of an Ohio court if its activities lead to “[transacting any business ” (emphasis added) in Ohio. Because it is such a broad statement of jurisdiction, R. C. 2307.382(A)(1) has given rise to a variety of cases which “have reached their results on highly particularized fact situations, thus rendering any generalization unwarranted.” 22 Ohio Jurisprudence 3d (1980) 430, Courts and Judges, Section 280. With no better guideline than the bare wording of the statute to establish whether a nonresident is transacting business in Ohio, the court must, therefore, rely on a case-by-case determination.

For purposes of personal jurisdiction, this court has long held the mere solicitation of business by a foreign corporation does not constitute transacting business in Ohio. Wainscott v. St. Louis-San Francisco Ry. Co. (1976), 47 Ohio St.2d 133, 1 O.O.3d 78, 351 N.E.2d 466. Instead, as the United States Supreme Court has stated, a nonresident’s ties must “create a ‘substantial connection’ with the forum State.” Burger King Corp. v. Rudzewicz (1985), 471 U.S. 462, 475, 105 S. Ct. 2174, 2184, 85 L.Ed.2d 528, 542.

It is clear from the record that Mr. K’s Foods solicited business in Ohio. The company frequently made long distance telephone calls to Ohio to sell its products on behalf of its home delivery division. Furthermore, the facts also indicate that independent distributors located in Ohio placed orders for pizza and cookies with Mr. K’s in Buffalo, which then shipped these goods to Ohio for ultimate sale here. This same pattern of operation was repeated between Buffalo and New York state, Pennsylvania, Delaware, Michigan and Illinois. In all instances U.S. Sprint provided the long distance telephone service. And while Mr. K’s denies any formal affiliation with the independent contractors, its long distance phone service with U.S. Sprint was ordered, not by the distributors, but by Anthony Korobellis, president of Mr. K’s Foods. The subject of this suit is the breach of contract between U.S. Sprint and Mr. K’s Foods due to unpaid telephone accounts for long distance charges made in Ohio and elsewhere.

From this record it is abundantly clear that Mr. K’s Foods was “[transacting any business in this state” within the plain meaning of R.C. 2307.382(A)(1). Once it has been determined the defendant is transacting business in Ohio pursuant to the “long-arm” statute, a court may accordingly exercise jurisdiction over the defendant. The court need not exercise personal jurisdiction over each claim. We hold that once an Ohio court acquires personal jurisdiction over a nonresident defendant for claims arising in Ohio, Civ.R. 18(A) permits joinder of related claims that do not arise in Ohio, as long as granting jurisdiction for all claims does not deprive defendant of the right to due process of law. Civ.R. 18(A) states: “A party asserting a claim to relief as an original claim, counterclaim, cross-claim, or third-party claim, may join, either as independent or as alternate claims, as many claims, legal or equitable, as he has against an opposing party.”

The language in R.C. 2307.382(C) limiting causes of action against a defendant to those “arising from acts enumerated in this section” applies only when “jurisdiction over a person is based solely upon this section.” Because of Mr. K’s continuous and systematic contacts with the state of Ohio, we do not base our decision solely upon Ohio’s “long-arm” statute but also upon a due-process, minimum-contacts analysis discussed infra. Thus we find that R.C. 2307.-382(A)(1) authorizes an Ohio court to exercise personal jurisdiction over a foreign corporation in order to settle the unpaid long distance telephone service bills owed to another nonresident when a significant number of the charges arose in Ohio and goods were shipped into the state as a result. Moreover, we hold that R.C. 2307.382(C) is not a bar to permitting the court from adjudicating the related unpaid long distance telephone bills that did not arise in Ohio.

II

The second step of our two-step analysis requires us to examine whether the exercise of personal jurisdiction here comports with due process of law under the Fourteenth Amendment to the United States Constitution.

The United States Supreme Court has held that in order for a state court to subject a foreign corporation to a judgment in personam, the corporation must “have certain minimum contacts with [the state] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’ * * *” (Citations omitted.) Internatl. Shoe Co. v. Washington (1945), 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95, 102. In formulating this rule, the United States Supreme Court emphasized that the analysis “cannot simply be mechanical or quantitative,” but rather whether due process is satisfied depends “upon the quality and nature of the activity.” Id. at 319, 66 S.Ct. at 159-160, 90 L.Ed. at 103-104.

This concept of minimum contacts serves two functions. First, it protects the nonresident defendant “against the burdens of litigating in a distant or inconvenient forum.” World-Wide Volkswagen Corp. v. Woodson (1980), 444 U.S. 286, 292, 100 S.Ct. 559, 564, 62 L.Ed.2d 490, 498. Second, it ensures that the states do not encroach on each other’s sovereign interest. Id.

Under the International Shoe doctrine, a nonresident corporation submits to a state’s personal jurisdiction when the activities of the company within the state are systematic and continuous. International Shoe, 326 U.S. at 319, 66 S.Ct. at 159, 90 L.Ed. at 103. And while the casual presence of a corporate agent or a single or isolated act is not enough, “other such acts, because of their nature and quality and the circumstances of their commission, may be deemed sufficient to render the corporation liable to suit.” Id. “Thus where the defendant ‘deliberately’ has engaged in significant activities within a State * * *, he manifestly has availed himself of the privilege of conducting business there, and because his activities are shielded by ‘the benefits and protections’ of the forum’s laws it is presumptively not unreasonable to require him to submit to the burdens of litigation in that forum as well.” Burger King Corp., supra, 471 U.S. at 475-476, 105 S.Ct. at 2184, 85 L.Ed.2d at 543. The Ohio Supreme Court adopted the basic principle of International Shoe in Wainscott v. St. Louis-San Francisco Ry. Co., supra, at syllabus, stating due process is satisfied when “a foreign corporation has certain minimum contacts with Ohio such that it is fair that a defendant defend a suit brought in Ohio and that substantial justice is done.”

Although Mr. K’s Foods maintained no offices or agents in Ohio, the company clearly had an active business presence within the state. The record before the court leaves no doubt that Mr. K’s purposely directed its business toward Ohio, establishing a clear pattern of systematic and continuous contacts. From Buffalo, New York, the company recruited a substantial network of independent distributors in Ohio and elsewhere. Mr. K’s supplied wholesale food products to its distributors for ultimate sales in at least six states, including Ohio. At the retail end, the distributors operated an extensive telemarketing network, calling Ohio residents to purchase pizza and cookies on behalf of organizations such as the Leukemia Society. The unpaid long distance charges at issue here were the result of these telemarketing campaigns. While Mr. K’s insists its relationship with the independent contractors is arm’s length, it is not disputed that Anthony Korobellis, president of Mr. K’s Foods, ordered their long distance phone service with U.S. Sprint. It is also not in dispute that Korobellis was the sole shareholder of three independent distributors, two of which operated in Ohio. The preceding analysis leaves no question that Mr. K’s activities are sufficient to satisfy the minimum contacts standard of International Shoe.

Following the minimum-contacts inquiry, in appropriate cases the court must also evaluate both the burden on the defendant of litigating in a distant forum and the interest of the forum state in settling the dispute. Burger King Corp., supra, 471 U.S. at 477, 105 S.Ct. at 2184, 85 L.Ed.2d at 543. “These considerations sometimes serve to establish the reasonableness of jurisdiction upon a lesser showing of minimum contacts than would otherwise be required.” Id. at 477, 105 S.Ct. at 2184, 85 L.Ed.2d at 543-544. However, “because ‘modern transportation and communications have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity,’ it usually will not be unfair to subject him to the burdens of litigating in another forum for disputes relating to such activity.” (Citation omitted.) Id. at 474, 105 S.Ct. at 2183, 85 L.Ed.2d at 541. Inasmuch as Mr. K’s routinely transacted business in Ohio, we find that requiring the company to litigate this case in Ohio posed no excessive burden to the defendant.

An interesting aspect of this case that compels Ohio jurisdiction is the nature of the causes of action. We are not dealing with defective goods being shipped into the state by nonresidents. Instead, the court is presented with several causes of action between two nonresidents regarding unpaid long distance telephone accounts — six of these arose in Ohio, eleven did not. The subject of the breach of contract is the unpaid long distance charges themselves. It is significant that the seventeen causes of action arose from the mode of communication used by Mr. K’s Foods to solicit business.⁴ Aside from points of origination and destination, the telephone service of all seventeen delinquent accounts is indistinguishable. If these claims are not permitted to be litigated in one forum, the parties would be forced to relitigate virtually the same facts and circumstances in several forums, possibly with different outcomes. It is the very nature of and the factual similarity among all seventeen causes of action that give rise to the court’s interest in litigating them all in one forum. See Chambers v. Merrell-Dow Pharmaceuticals, Inc. (1988), 35 Ohio St.3d 123, 519 N.E.2d 370.

From the foregoing analysis we can only conclude that, in accordance with due process, the trial court properly subjected Mr. K’s Foods to a judgment in personam over all claims. Thus, we reverse the judgment of the court of appeals and reinstate the judgment of the trial court.

Judgment reversed.

Moyer, C.J., A.W. Sweeney, Douglas, Blackmon and F.E. Sweeney, JJ., concur. Pfeifer, J., dissents. Patricia A. Blackmon, J., of the Eighth Appellate District, sitting for Resnick, J.

Footnotes

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. In Kentucky Oaks Mall Co. v. Mitchell’s Formal Wear, Inc. (1990), 53 Ohio St.3d 73, 75, 559 N.E.2d 477, 479, the Ohio Supreme Court found the two to be coextensive, holding “that the statute and civil rule are consistent and in fact complement each other.”

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. Since the original complaint resulted in a default judgment, the question of whether Mr. K’s Foods is responsible for the seventeen unpaid accounts is foreclosed. Instead, the court must decide the number of these accounts upon which U.S. Sprint may obtain a judgment in Ohio courts.

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. In fact, because the causes of action arose from the mode of communication Mr. K’s used in soliciting business, it may be possible that mere solicitation is indeed considered “[t]ransacting any business,” obviating the need to look for more consequential ties.