Woodrow Hutson v. Fehr Brothers, Inc., Acciaierie Weissenfels, John David Epperson v. Fehr Brothers, Inc., Acciaierie Weissenfels

584 F.2d 833

• Court: Court of Appeals for the Eighth Circuit
• Decided: August 18, 1978
• Docket: 77-1818
• Status: Published

Opinions

BRIGHT, Circuit Judge.

This permissive interlocutory appeal stems from the attempted exercise of in personam jurisdiction over a foreign corporation, by substituted service, under the Arkansas long-arm statute. Ark.Stat.Ann. §' 27 — 2502(C)(1)(d) (Supp.1975). The United States District Court for the Western District of Arkansas denied defendant-appellant Acciaierie Weissenfels’ motion to dismiss two suits seeking damages for alleged bodily injuries for lack of in personam jurisdiction. The court then made the appropriate 28 U.S.C. § 1292(b) certification upon motion of Weissenfels and we permitted the appeal to be taken. We reverse the district court.

I.

Plaintiffs Woodrow Hutson and John David Epperson, residents of Arkansas, filed separate related product liability actions seeking damages for injuries allegedly sustained on May 9, 1976. Named as defendants in these actions were Weissenfels, an Italian corporation with its principal place of business in Fusine, Valromana, Italy, and Fehr Brothers, Inc., a New York corporation with its principal place of business in New York City, New York.

In their complaints, plaintiffs contend that they were injured while working at the Murfreesboro Lumber Company in Mur-freesboro, Arkansas, when a three-eighths inch chain broke. Murfreesboro Lumber Company purchased the chain from the Carroll Building and Appliance Company in Murfreesboro, Arkansas. The open barrel from which the chain was purchased allegedly bore the label FAIRLINE, the trademark used by defendant Fehr Brothers, Inc. It was also stamped “Yugoslavia.”

Plaintiffs allege a complicated series of transactions linking Weissenfels to the chain in question. They claim that the chain was manufactured in Yugoslavia by some unknown manufacturer. Weissenfels purchased the chain and then packaged and sold it as its own product to Frank Fehr & Co., a British corporation with the exclusive right to sell Weissenfels’ products in North America. Frank Fehr & Co. resold the chain to its American subsidiary, Fehr Brothers, Inc. Fehr Brothers then repackaged the chain under its own brand name, FAIRLINE, and resold it. Ultimately, the chain reached the retailer, Carroll Building and Appliance Company, who sold the chain to the plaintiffs’ employer, Murfreesboro Lumber Company. The plaintiffs also alleged in their complaints that between October 1,1972, and September 30,1976, Fehr Brothers, Inc., sold Weissenfels chains in Arkansas for a total revenue of more than $74,000.

In its reply, Weissenfels denies that it purchased or packaged this particular chain as its own product. Because this case is before us on appeal from a motion to dismiss for lack of personal jurisdiction, however, we must assume that the facts supporting jurisdiction in plaintiffs’ complaints are true. This permits us to accept as true plaintiffs’ allegation that Weissenfels was one link in the series of commercial transactions that brought the chain to Arkansas.

II.

This appeal presents the following two issues: whether the Arkansas long-arm statute authorizes the exercise of jurisdiction over Weissenfels and, if so, whether the district court’s exercise of in personam jurisdiction over Weissenfels would violate the due process clause of the fourteenth amendment.

A.

The relevant provision of the Arkansas long-arm statute, Ark.Stat.Ann. § 27-2502(C)(1)(d), states:

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

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(d) causing tortious injury in this State by an act or omission outside this State if he regularly does or solicits business, or engages in any other persistent course of conduct in this State or derives substantial revenue from goods consumed or services used in this State[.]

The statute establishes two requirements pertinent to this case: (1) that Weissenfels’ acts or omissions outside of the state caused the tortious injury in Arkansas; (2) that Weissenfels derived “substantial revenue” from the sale of its chains in Arkansas.

The first of these requirements presents no great difficulty for, as we have already noted, we must accept as true the allegations in plaintiffs’ complaints that the chain was repackaged and resold by Weissenfels. Under a products liability theory, the seller as well as manufacturer may be liable for injuries caused by defective products.

The revenue issue is more troublesome, however, because plaintiffs pleaded no facts indicating how much revenue is derived by Weissenfels from Arkansas sales. Instead, plaintiffs merely alleged that Fehr Brothers, the American subsidiary of Frank Fehr & Co., the British company, derived $74,-551.35 in revenue from Arkansas sales over a four-year period. Because Weissenfels is at least two steps removed from Fehr Brothers in the distribution chain, it is safe to assume that the $74,551.35 figure is diminished. Under applicable Arkansas case law, however, the revenue requirement is met. For example, the Arkansas Supreme Court in Pennsalt Chemical Corp. v. Crown Cork & Seal Co., 244 Ark. 638, 426 S.W.2d 417, 419 (1968), held sales over a three-year period ranging from a high of $1,987.78 to a low of $123.60 to be “substantial revenue” under this statute.

Accordingly, Arkansas state law permits in personam jurisdiction over Weissenfels in this case.

B.

We must still determine whether the exercise of in personam jurisdiction over this foreign corporation would violate its right to due process under the fourteenth amendment.

In order to satisfy due process in cases in which service of process is accomplished by means of a long-arm statute, the foreign corporation must “have certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’ ” International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). In addition, “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 * * Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed.2d 1283 (1958).

The Supreme Court last term in Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977), discussed the applicable due process test for the exercise of personal jurisdiction over a foreign corporation:

Thus, the inquiry into the State’s jurisdiction over a foreign corporation appropriately focused not on whether the corporation was “present” but on whether there have been

“such contacts of the corporation with the state of the forum as make it reasonable, in the context of our federal system of government, to require the corporation to defend the particular suit which is brought there.” * * *

Mechanical or quantitative evaluations of the defendant’s activities in the forum could not resolve the question of reasonableness:

“Whether due process is satisfied must depend rather upon the quality and nature of the activity in relation to the fair and orderly administration of the laws which it was the purpose of the due process clause to insure. That clause does not contemplate that a state may make binding a judgment in personam against an individual or corporate defendant with which the state has no contacts, ties, or relations.” .

Thus, the relationship among the defendant, the forum, and the litigation, rather than the mutually exclusive sovereignty of the States on which the rules of Pennoyer rest, became the central concern of the inquiry into personal jurisdiction. [Shaffer v. Heitner, 433 U.S. 186, 203-04, 97 S.Ct. 2569, 2580, 53 L.Ed.2d 683 (1977), quoting International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (footnote omitted).]

The courts interpreting the International Shoe “minimum contacts” — fairness doctrine on occasion have tended to expand jurisdiction so as to include any corporation that

introduces its product into the stream of interstate commerce if it had reason to know or expect that its product would be brought into the state where the injury occurred * * *. [Eyerly Aircraft Co. v. Killian, 414 F.2d 591, 596 (5th Cir. 1969).]

Indeed, the court in Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761 (1961), noted that jurisdiction is presumed unless the defendant can prove that the presence of the product in the forum state was an unforeseeable event. Nonetheless, the requirement of minimum contacts mandates some degree of concern for the interest of the nonresident defendant.

In this case, we cannot agree with the district court’s conclusion that exercise of in personam jurisdiction over Weissenfels is consistent with constitutional due process requirements established by the Supreme Court in International Shoe and reiterated in Shaffer. The determination, for example, of whether the “minimum contacts” test of International Shoe is met is not an easy task. Indeed, as the Supreme Court recently emphasized:

[A]n essential criterion in all cases is whether the “quality and nature” of the defendant’s activity is such that it is “reasonable” and “fair” to require him to conduct his defense in that State. International Shoe Co. v. Washington, [326 , [66 S.Ct. [154], at 158-159] 90 L.Ed. 95] (1945).] * * * Like any standard that requires a determination of “reasonableness,” the “minimum contacts” test of International Shoe is not susceptible of mechanical application; rather, the facts of each case must be weighed to determine whether the requisite “affiliating circumstances” are present. Hanson v. Denckla, 357 U.S. 235, 246, [78 S.Ct. 1228, 1235, 2 L.Ed.2d 1283] (1958). [Kulko v. Superior Court of California, 436 U.S. 84, 92, 98 S.Ct. 1690, 1697, 56 L.Ed.2d 132 (1978).]

In this case we are compelled to reach the conclusion that the requisite “affiliating circumstances” are not present. The connection between Arkansas and Weissenfels is an attenuated one.

Weissenfels’ contacts with Arkansas consist only of the fortuitous introduction of Weissenfels products into the forum state through the decision of Prank Fehr & Co., a British company. Weissenfels neither manufactured the defective chain nor sold or marketed it in the United States. Weissen-fels’ only apparent connection with the chain was that at one time it repacked and resold it to Frank Fehr & Co. These are insufficient “minimal contacts” with the forum state for Arkansas to exercise jurisdiction over Weissenfels. Weissenfels did not consciously solicit or purposefully avail itself of the privilege to conduct business in the forum state, as Hanson requires for the exercise of jurisdiction. 357 U.S. at 253, 78 S.Ct. 1228. The Fehr Co. exercises control over the selection of the customers and other marketing decisions relating to the sales of the Weissenfels products which it purchases. We recognize that the State of Arkansas has a strong interest in providing a forum for its residents who are injured by defective products of foreign corporations ¹ and that Weissenfels did repackage and resell the chain to Frank Fehr & Co. Nevertheless, in personam jurisdiction simply cannot rest on such a frail foundation.

Furthermore, we realize that the question of jurisdiction, which is relatively more concerned with fairness, is distinct from that of venue, which is more concerned with convenience. “Nevertheless, whatever will support the plea [of forum non conveniens] will excuse the corporation from defending the suit * * and can be considered in determining whether jurisdiction should be exercised. Latimer v. S/A Industrias Reunidas F. Matarazzo, 175 F.2d 184,186 (2d Cir. 1949), cert. denied, 888 U.S. 867, 70 S.Ct. 141, 94 L.Ed. 531 (1949).

Various considerations usually associated with forum convenience are pertinent to whether Weissenfels should be subject to jurisdiction in Arkansas. Weissenfels is burdened substantially by having to defend this lawsuit. It must hire United States counsel and support personnel and presumably transport its witnesses to Arkansas from Italy in the event of trial. Naturally, it will be strongly tempted to settle, even if it believes it is not liable, because of the tremendous expense of trying the lawsuit, an expense that bears far more heavily on it than on the other parties.

We, therefore, conclude that Arkansas’ exercise of jurisdiction over Weissenfels would offend the “traditional notions of fair play and substantial justice” standard established in International Shoe.

We reverse and remand, directing that Weissenfels be dismissed as a defendant.

1 . We further note that plaintiffs in this action do not suffer from a dearth of available defendants. Arkansas has exercised jurisdiction over the packager and distributor, Fehr, and can exercise jurisdiction over the retailer, Carroll Building and Appliance Company.