# Petition — Jadair, Inc. v. Walt Keeler Co. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385009_0672%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1982 - **Citation:** 459 U.S. 944 ## Text 83-330 IN THE | CLERK SUPREME COURT OF THE UNITED s October Term, 1981 JADAIR, INC., Petitioner, v. THE WALT KEELER COMPANY, INC., Respondent. ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT PETITION FOR WRIT OF CERTIORARI LAURENCE C. HAMMOND, JR. (Counsel of Record) ROSS R. KINNEY MARK E. pesowenes ° QUARLES & BRADY 780 North Water Street Milwaukee, Wisconsin 53202 414/277-5000 QUESTION PRESENTED 1. Would it be a denial of Due Process for the federal court sitting in Wisconsin to exercise personal jurisdic- tion pursuant to Wisconsin's Long Arm statute over respondent The Walt Keeler Company, Inc. ("Keeler") where, inter alia (1) Keeler entered into a contract purchasing a piece of complicated machin- ery of substantial value from petitioner Jadair, Inc. ("Jadair"), a Wisconsin seller-manufacturer, and this action arises out of such contract, (2) Keeler was told by Jadair that the unit would be manufactured in Wisconsin, (3) Keeler prior to contracting knew that the unit necessarily had to be manufactured in Wisconsin, the location of Jadair's only manufacturing facility, and it was manu- factured in and shipped from Wisconsin by Jadair F.0.B. Jadair's Wisconsin plant, (4) Keeler has had an ongoing relationship with Jadair involving one overall continu- ing business transaction in which Jadair, pursuant to Keeler's orders, also subse- quently shipped various component parts from Wisconsin to be used by Keeler in repair-maintenance of the complicated machinery, and (5) Keeler had numerous interstate mail and telephone contacts with Jadair as an integral part of Keeler's ongoing business dealings with Jadair? TABLE OF CONTENTS Opinions Below .......eeeececes JUPISGICTION ...... cc ceceeeeees Statutory Provisions Involved.. Statement of the Case ......... Reasons for Granting Te SOR. bab ne cabede 6a ebeoooes I. THIS CASE CONTAINS A UNIQUE AND UNDISPUTED FACTUAL VEHICLE THAT SHARPLY FOCUSES THE IMPORTANT, CONSTANTLY RECURRING, AND AS YET UNRESOLVED DUE PROCESS ISSUE GOVERNING THE OUTER LIMITS THAT STATE LEGISLATURES CAN GO TO IN ENACTING LONG ARM STATUTES EXTENDING JURISDICTIONAL POWER TO BOTH FEDERAL AND STATE COURTS IN CASES INVOLVING II. THE DECISION BELOW IS IN CONFLICT WITH A HOST OF FEDERAL AND STATE DECISIONS, INCLUDING THOSE OF THE WISCONSIN SUPREME COURT AND ALSO OTHER SEVENTH CIRCUIT DECISIONS .....55 sevveees > Nn N WN 14 A. General Circuit Court Conflicts ...... B. Conflicts Between Federal and State Courts Sitting in the Forum State ...... Cc. Conflicts Within the Seventh Circuit and Emergence of the Erroneous Physical Presence and/or Multiple Transactions Requirement ......... ITI. THE DECISION BELOW IS IN IRRECONCILABLE CONFLICT WITH THE RATIONALES EMBRACED BY THIS COUKT AND TTS PROGENY =... SE |b a n'c00 oe Cobb wees oe d26 ii 17 26 26 39 56 TABLE OF AUTHORITIES Cases Page feck Inc. 1972), cert. denied, 411 U.S. 966 (1973) ..........- 23 30,34,35 17 20 ir.), ' * , 405 U.S. 104i eh acevo eee we 32-33 EB 4-8 x: mE zr ng C3. ee REO! 6 6 One 06. Fee h obec ce 26 18-19 ae ELD Dees OE CoN Ow 006 b e060 45,47-50 ae .2d Py. See + cnetadends 19-22,25 iii an yen Bey “5 0.8. 914 a iv 15,17 14,26,27 29-32, 3 37,42- 46 10,42,55 56 15,17 18 15,17 22,26,27, 28 23 32,34,39- 41,46 23 23-24 s. ; “W.2d 872 (1970), dismissed, 402 U.S. 902 { Pie on6 6 6 os Statutes Wis. Stat. Section 801.05 ..... 28 U.S.C. Section 1254 (1) 28 U.S.C. Section 1332 23 28 37 9,30,31, 47 54-56 26 9,46 48-49 42-44 No. IN THE SUPR’.ME COURT OF THE UNITED STATES October Term, 1981 JADAIR, INC., Petitioner, v. THE WALT KEELER COMPANY, INC., Respondent On Writ of Certiorari to the United States Court of Appeals For the Seventh Circuit PETITION FOR WRIT OF CERTIORARI Petitioner Jadair, Inc.* ("Jadair") respectfully prays that a Writ of Certicrari issue to review the judgment and opinion of th. United *Pursuant to Supreme Court Rule 28.1, Jadair states that it has only one relationship falling within the ambit of this rule, to-wit: a subsidiary named Eco-Tec, Inc. States Court of Appeals for the Seventh Circuit entered in this proceeding. OPINION BELOW The opinion of the Court of Appeals is reported at 679 F.2d 131 and the opinion rendered by the District Court for the Eastern District of Wisconsin is reportec at 506 F. Supp. 879. Both also appear in the Appendix. JURISDICTION The judgment below was entered on May 26, 1982. This Petition for Certiorari was filed within ninety (90) days of that date. This Court's juris- diction is invoked under 28 U.S.C. Section 1254(1). STATUTORY PROVISIONS INVOLVED WIS. STAT. Section 801.05: Personal Jurisdiction, Grounds for Generally. A court of this state having jurisdiction of the subject P< matter has jurisdiction over a person served in an action pursuant to s. 801.11 under any of the following circumstances: * * (5) Local Services, Goods or Contracts. In any action which: (a) Arises out of a promise, made anywhere to the plaintiff or to some third party for the plaintiff's benefit, by the defendant to perform services within this state or to pay for services to be performed in this state by the plaintiff; or (b) Arises out of services actually performed for the plaintiff by the defendant within this state, or services actually performed for the defendant by the plaintiff within this state if such performance within this state was authorized or ratified by the defendant; or * * * (ad) Relates to goods, docu- ments of title, or other things of value shipped from this state by the plaintiff to the defendant on his order or direction; STATEMENT OF THE CASE This is an action for a declaratory judgment that Jadair is not indebted to Keeler in any way via a vis the difficulties that Keeler has experi- enced with the Redi-Wash unit and auxiliary equipment it purchased from Jadair. It originally was brought by Jadair in the Circuit Court for Milwaukee County, State of Wisconsin. Keeler removed the action to the United States District Court for the Eastern District of Wisconsin, which court granted jurisdiction under 28 U.S.C. Section 1332 because of diversity of citizenship. The District Court denied Jadair's motion to remand because the amount in controversy did not exceed $10,000 and dismissed the -4- action for lack of personal jurisdiction over Keeler. The material jurisdictional facts are undisputed. Jadair is a Wisconsin corporation that manufactures Redi-Wash machines and equipment at its plant in Port Washington, Wisconsin. Redi-Wash is the tradename for large complicated machines designed for cleaning out mechanical cement mixer trucks. Such machines are only specially manufactured pursuant to customers’ orders. Keeler is a Kansas corporation involved in the business of producing, delivery and selling concrete and other building materials in Wichita, Kansas. In February of 1977, Jadair's Vice President for Marketing and Sales, Kenneth Rust, met in Kansas with Keeler's Presi- dent, Earl Callison, for the purpose of discussing Jadair equipment that Keeler might be interested in purchasing. Mr. Rust gave his standard sales presentation in which he described the history and development of Jadair and its facilities and location in Port Washington, Wisconsin. Mr. Rust told Mr. Callison that Jadair's equipment is manufactured at its facil- ities in Port Washington. Jadair's sales manager, William Sarring, also met in Kansas with Keeler's President, Earl Callison, on Octcber 25, 1978, to discuss the possible sale of a Redi-Wash machine to Keeler. During this meeting, Mr. Sarring informed Mr. Callison that if Keeler purchased the unit it would be produced at and shipped from Jadair's facility in Port Washington, Wisconsin. This is, and always has been, Jadair's only facility for the manufacture of its products which are sold within the United States. Mr. Callison was informed that Port Washington, Wisconsin, was the only place where the Redi-Wash unit could be built. On November 1, 1978 the parties entered into a contract for the sale and purchase of a Redi-Wash machine. It provided for shipment F.0.B. Jadair's Port Washington, Wisconsin plant. The total purchase price was $75,850. The contract did not expressly require Jadair to manufacture the equipment in or ship it from Wisconsin. In addition to its initial purchase of the Redi-Wash Unit, Keeler subsequently has engaged in numerous (over a dozen) related sub-transactions involving component parts to be used in the repair-maintenance of the complicated Redi-Wash machine being shipped from Jadair to Keeler pursuant to Keeler's orders. Further, there were a host of interstate "contacts" (e.g., telephone calls, correspondence, invoices) between Jadair and Keeler reflecting their ongoing business relationship. However, Keeler's representatives never physically came to Wisconsin and Keeler's only "contacts" with Wisconsin were involved in this one overall ongoing business transaction. we REASONS FOR GRANTING THE WRIT #5) ANL NDISPUTED | ACTUAL VEI qTCL | THA’ IHARPLY FOCUSES THE IMPORTAN: SONSTAN; (LY RECURRING, AND AS YE" INRESOLVED DUE PROCESS ISSUI SOV’ IRNING THE OUTER LIMITS THA BAAS ma CESLATIN gS MN INACTING LON L_AND STAT COURTS IN CASI is INVOE arte NOE oss ae NIERSTAT Jurisdictional issues arising out of such common business relationships (e.g., single "transactions" involving contacts to manufacture and sell custom made goods) voluntarily and knowingly entered into interstate between corporate business enterprises, have been regularly reaching the courts for many years. Existing conflicts, confusion, inconsistency and uncertainty of result doubtlessly means that this litigation flow will continue unabated until this Court grants certiorari in a case such as this one. The conflicting holdings and ratio- nales gleaned by lower courts from exist- ing Due Process jurisdictional precedent -8- of this Court are so severe and wide- spread that they exacerbate the custom- ary predictive difficulties posed by the necessary amorphousness of the Due Process guarantee. The present situation is so unpalatable that responsible jurists and commentators have even gone to the extent of raising the question whether or not this Court should adopt a completely different set of more detailed standards, at least to govern this type of Due Process issue.* It must be said that viewing our federal and state courts as a single system of justice, neither judges, attorneys, nor parties can know short of protracted litigation what Due Process mandates in cases involving such common commercial transactions. Subsequent to International Shoe v. Washington, 326 U.S. 310 (1945), this Court has never decided whether or under what circumstances a single consensual interstate commercial transaction out of which a suit arises--other than an insurance contract (assuming McGee v. International Life Inurance Co., 355 U.S. 220 (1958), is to be so iimited)--having substantial interstate "contacts" with the forum state, is sufficient to satisfy Due Process. The time is ripe for this Court to mark definitive guidelines in the application of International Shoe and its progeny in such common commercial contexts. The recent vintage of many of the decisions discussed or cited herein evidence a widening, not a narrowing, of the chasms among the courts on this issue. On substantially indistinguishable facts, the holdings, as well as the underlying rationales, vary from circuit -10- to circuit, from state to state, between different district court judges and appellate panels within given circuits and between federal and state courts sitting in the same state. This results from the litigative verity that the Due Process jurisdictional decisions handed down by this Court subsequent to International Shoe do not yield reasor- ably clear guidance because they dealt with markedly different factual situa- tions posing Due Process issues with markedly different “fairness” considera- tions. This is a classic case illustrating the litigation flow that certain already greatly overburdened federal district courts are reaping pursuant to defendants’ accurate perceptions that the Due Process jurisdictional mandate is stricter in some Circuit's federal courts than in the state courts located therein. This also -ll- ais is an important issue meriting resolu- tion by this Court because there is a very substantial line of cases typified by the decision below, in which Federal Courts are not only barring the exercise of jurisdiction, but in doing so are overriding the expressed will of various state legislatures by essentially holding that their respective Long Arm statutes are unconstitutional. Because of certain unique undisputed factual elements, this case presents a well nigh perfect vehicle for this Court to resolve this omni-present and impor- tant Due Process issue. The contract here had no term expressly "requiring" manufacture in Wisconsin. However, as the District Court held, the nature of the contractual obligations Keeler intentionally entered into rendered performance in Wisconsin “inevitable” although not "necessary." Further, Keeler was expressly told where the goods elge were to be manufactured. Not only did Jadair nowise have complete control ina practical sense over where to perform, but Keeler was fully aware (i.e., had knowledge) that performance in Wisconsin was not only intended, but was in a practical sense necessary. Moreover, Jadair did perform the contract (i.e., specially design and manufacture the unit, and ship it) in Wisconsin. There was not merely one isolated "single act” involving Jadair and Keeler, but rather an on-going interstate business relation- ship, involving numerous interstate "contacts" and sub-transactions occurring in the context of one overall commercial transaction. Finally, Wisconsin has a very specific and far reaching Long Arm statute that unequivocally poses the issue whether it violates the Due Process guarantee. -13- DECISION “HOST OF CLUDING WISCONSIN SUPREME COt cae zoo OTHER SEVENTH CIRCUIT DECISIONS. The deep, fundamental, and widespread divisions among various federal and state courts vis a vis this type of issue is only too well documented, and the cases involved therein are ever increasing. See, e.g., Lakeside Bridge & Steel Ce. v. Sta ° , a2 597 F.2d 596, 601-03 (7th Cir. 1979) (held no jurisdiction), cert. denied, 445 U.S. 907 (1980) (opinion of Justices White and Powell dissenting). This disarray fur- nishes a fertile ground for law review commentators, but may well have a dis- ruptive effect on commercial relations. Further, it indisputably prompts a very substantial quantum of litigation on this issue, much of which is being channeled into overburdened federal courts as a result of defendants such as Keeler removing cases from state courts to -14- federal courts in order to obtain a more favorable forum for resolution of this Due Process issue. The above verities are underlined by the following conflicting decisions dealing with this basic Due Process issue as to which there were recent denials of certiorari, to-wit: Mouzavires v. Baxter, 434 A.2d 988 (D.C. Cir. 1981) (jurisdiction upheld), cert. denied, _—Ss«sU.S. ~__, ~- 102 S. Ct. 1643 (1982) (Justices White and Powell dissenting); Iowa Electric Light & Power Co. v. Atlas Corp., 603 F.2d 301, (8th Cir. 1979) (jurisdiction denied), cert. denied, 445 U.S. 911 (1980) (Justices White, Powell and Blackmun dissenting); s k _ v. Chelsea House Publishers, 621 S$.W.2d 560 (Tenn. 1981) (jurisdiction upheld), cert. denied, __. ~*U-S.___, 102 S.Ct. 1623 (1982) (The Chief Justice, along with Justices White and Powell dissenting). -15- This lack of clear guidance by this Court on this basic Due Process issue results not only in a steady flow of petitions such as this one, but also patently conflicting holdings and/or rationales among various circuits, and ostensible conflicts between cases decided by different panels within the same circuit. The situation poses well nigh insurmountable difficulties for federal district court judges* resolving such issues in the first instance. From litigants’ attorneys’ point of view, there is no way to predict with any reasonable certainty how given close Due Process issues will be ulti- mately decided and hence there always is a ready incentive for both sides to litigate the issue at the appellate level. -_ Witness the perceptive comments of the District Court below punctuated by terms such as “enigmatic”, "retrench- ment", “cast doubt", and “further muddled". -16- A. General Circuit Court Conflicts Recent developments in this country outside the Seventh Circuit demonstrate not only the existence of the afore- mentioned conflict of holdings and ration- ales, but also the litigative reality that the existent Due Process jurisdic- tional decisions of this Court do not yield sufficiently precise guidelines vis a vis the proper manner in which such issues should be resolved. The nature and extent of these ever widening chasms among the courts is typified by comparing the very recent holdings and rationales in (1) Nicholstone and Mouzavires to (2) this case and Iowa Electric. Further, it also is instructive to compare the deci- sion below to the following very recent decisions whose holdings and/or rationales are in irreconcilable conflict therewith: CleveRock Energy Corp. v. Trepel, 609 F.2d 1358, 1364-65 (10th Cir. 1979) (payments sent to forum state and -l17- "reasonably could have anticipated” plaintiff's duties under the contract "would be largely performed” at plain- tiff's headquarters in the forum state); Go stries v. Ryder Scott Co., 378 Mass. 1, 389 N.E.2d 76, 78-83 (Mass. 1979) (plaintiff's headquarters were known to be in forum state; defendant engaged in interstate correspondence and telephone calls over a period of 17 months; "defendant's actual physical presence here (in forum state) is not required ..."; defendant's business "contacts" were “deliberate and not fortuitous;" the forum state has a "legitimate interest in providing a forum" for its corporate citizens to litigate this controversy); Murray v. Huggers Manufacturing, 398 So.2d 1323 (Miss. 1981) (defendant-seller knew plaintiff-buyer located in forum state and plaintiff performed there); Koenig v. International Brotherhood of Boilermakers, -18- Local Lodge No. 5, 284 Pa. Super. 558, 426 A.2d 635, 639-644 (1980) (1 dissent; majority reasoned that "[{a] nonresident defendant that enters into a contract that he knows will be substantially performed in the forum state [by plaintiff] should “reasonably anticipate being haled into court in that state” if disagree- ments develop). The decision below also is in irrecon- cilable conflict with a host of earlier cases in other circuits holding that a defendant buyer's knowledge that goods which it ordered would be manufactured in the forum state renders it fair in a Due Process sense to assert personal jurisdic- tion over that defendant even in a "single act" (i.e., solely one contract) case -- regardless whether he was physically present in the forum state. Consider, for example, - t ices Corp. v. Van Dusen Air, Inc., 466 F.2d 220, _ 19- 226-29 (6th Cir. 1972) where the Sixth Circuit reasoned, inter alia: "In some cases, meeting this requirement [that the defendant purposefully acted within the forum] may pose the most difficult challenge of all for a plaintiff ‘ seeking to establish juris- diction over a non-resident defendant. Here, however, it seems clear that the defendant acted in such a manner. Van Dusen entered into contract negotiations involving a substantial order for the manufacture of goods with a firm which it neces was based in Ohio its produc- tion facilities located within that State." 466 F.2d at 266-67. (emphasis added) The Sixth Circuit, along with numerous other courts, assesses whether a breach of contract cause of action arises out of the defendant's transaction of business in the forum by looking to the indirect effects within the forum state of defendant's acts physically accom- plished outside the forum state. Id. at 229. The Seventh Circuit, as well as -20- a substantial number of other courts, focuses not on such effects, but rather on the geographical location of the events giving rise to the in-state effects. Accordingly the Sixth Circuit line of cases does not require physical presence of the defendant's represnta- tives in the forum state, while the Seventh Circuit line of cases does. Further, the Seventh Circuit's current basic approach is irreconcilable with the Sixth Circuit conclusion that Due Process fairness does not preclude the assertion of jurisdiction over corporate defendants in disputes arising out of such commercial transactions: "It cannot be disputed that a state has an interest in resolving a suit brought by one of its residents. [Citations omitted]. That interest necessarily becomes more significant when, as here, a contract calling for substantial production of goods is entered into, with the production of goods and other performance under the contract to take place entirely within the forum @2ile- ua state. [Citing, ; the Seventh Circu : s decision in O'Hare Int einat sonal Bank Ti77 (yeh ¢ Bea ( Cir. 1971)]}. Holding a defendant answerable for his failure to perform the obligations imposed upon him by such a contract is consistent with Ohio's express policy of securing to its businessmen the benefit of their bargains." Id. at 232. Many, if not most state legislatures (including Wisconsin's) in enacting their respective Long Arm statutes have so seen their states’ interests and have extended their state courts’ jurisdiction over such defendart-buyers. The Seventh Circuit also is in irreconcilable conflict with the Eighth Circuit's decision in Electro-Craft Co v._Maxwell Electronics Corp., 417 F.2d 365, 369 (8th Cir. 1969), where it was reasoned, inter alia: "It entered into a transaction having an impact on the commerce of that state. By so doing, it invoked the benefit and protection of Minnesota's laws and could reasonably have anticipated that its act would have consequences in Minnesota. The fact that no agent of the defendant entered this state is not controlling.” (Citation omitted]. In Pedi Bares, Inc. v. P & C Food Markets, Inc., 567 F.2d 933, 937 (10th Cir. 1967), a case with a very similar fact situation, it was held: "Initial (i.e. solicita- tion) contact is not decisive. The subsequent conduct of P & C shows that it purposely availed itself of the privilege of carrying on activities to secure goods from a Kansas manufacturer and seller." For other cases conflicting with the decision below, see also, @.g., Product Promotions, Inc. v. Cousteau, 495 F.2d 483 (Sth Cir. 1974); Ajax Realty -orp. ook, Inc., 493 F.2d 818, 822 (4th Cir. 1972), cert. denied, 411 U.S. 966 (1973); Southern Machine Co. v. Mohasco Industries, Inc., 401 F.2d 374, 382 (6th Cir. 1968); Shealy v. Challenger -23- Manufacturing Co., 304 F.24 102 (4th Cir. 1962). The decision below also is in irreconcilable conflict with numerous decisions in other jurisdictions which give substantial weight to buyers’ inter- state mail and telephone "contacts" with seller-manufacturers located in the forum state. While such contacts are not in themselves sufficient, they are important factors and here they should have consti- tuted the requisite "plus" necessary to satisfy Due Process. Numerous such "contacts" manifested Keeler's active involvement in various business subtrans- actions that were essential parts of its on-going and necessary business relation- ship with Jadair.* * Keeler bought a complicated piece of machinery that required ongoing inter- state repair-maintenance support from Jadair in Wisconsin even after the mach- inery was installed in Kansas. The sales contract was however a “one shot" business (footnote continued) -24- Telephone and mail communications, allowing Keeler to avoid the expense and time of traveling to Wisconsin, were the means by which it reaped the benefits of Jadair's activities in Wisconsin accom- plished at its behest. See, e.g., In- vices Co ration v. Van Dus Air, Inc., supra, at 235: "A letter or telephone call may, in a given situation, be an indica- tion of substantial involvement by the defendant or its agents." "The test of whether business was transacted within the state must be applied in the context, not of communi- cation and transportation criteria of yesteryears, but of modern day commercial (footnote continued) transaction that terminated when the machinery was shipped. Absent con- tinual support from Jadair, it could not be effectively operated by Keeler in Kansas as Jadair had unique and necessary repair-maintenance expertise. Hence there were numerous post-shipment interstate "contacts" of Keeler with Jadair in Wisconsin. -25- and personal accelerated relationships.” Q'Hare International Bank v. Hampton, 437 F.2d 1173, 1177 (7th Cir. 1971). B. r St As was candidly recognized in Lakeside, supra, the Seventh Circuit's Lakeside-Jadair doctrine also is in irreconcilable conflict with the Wisconsin Supreme Court's prevailing holdings and rationales. See, e.g., Zerbel v. Federman & Co., 48 Wis.2d 54, 179 N.W.2d 872, 873-74, 877-78 (1970), appeal dismissed, 402 U.S. 902 (1971); Flambeau Plastics Corp. v. King Bee Manufacturing Co., 24 Wis.2d 459, 129 N.W.2d 237, 241 (1964). Conflicts and murkiness within given circuits, resulting from the lack of clear guidance from this Court's Due Process jurisdictional decisions, as well as the -26- recent emergence of what is at least arguably a per se physical presence and/ or multiple “transactions” requirement as to this type of Due Process issue, is typified by the situation within the Seventh Circuit. The decision below, as well as Lakeside, is, at least arguably, in conflict with other decisions rendered by different panels. O'Hare International Bank v. Hampton, supra, (7th Cir. 1971), involved a suit by the assignee of an interstate lease of an aircraft against its guarantors. Holding that Due Process did not bar the exercise of jurisdiction, that panel emphasized: "The defendants certainly must have contemplated the effects in Illinois of a failure to make the monthly rental payment. Further- r -*, the fact that the g...antee wa con- in t state clearly demonstrates that the defendants ‘invoked the benefits and protection' of the state." Id. at -27<- 1177 (citations omitted) (emphasis added). The Seventh Circuit viewed the jurisdictonal facts in United States Ry. Equip. Co. v. Port Buron & Detroit R. Co., 495 F.2d 1127 (7th Cir. 1974), which irivolved an interstate lease agreement covering four hundred railroad box cars, as being virtually identical to those in O'Hare, emphasizing: "The only significant fact present in “Bare which is missing re is that in 0’ the defen- dant initia the lease negotiations by contact- ing plaintiff's assignor in Illinois. In the con- lease contemplated and in fact produced substantial on-going activity within Illinois, a factor apparently not t present Ae pet at 1130 ( is ). The rationales and holdings of the Seventh Circuit in these two cases are, at least ostensibly, difficult to recon- cile with the decision below in this case or Lakeside. Further, the rationale and holding in this case went well beyond Lakeside. Keeler knew in advance of con- tracting that it was inevitable that Jadair would perform in the forum state. Further, there was not a "single act,” but rather an ongoing business relation- ship involving numerous interstate orders, shipments, payments, telephone calls, etc. in a repair-maintenance context. The Seventh Circuit in so extending the Lakeside decision exacerbated existing uncertainties in this Circuit vis a vis resolution of this type of Due Process issue. The decision below, at least arguably, conflicted with other post- Lakeside decisions. The degree of uncertainty and ostensible conflict is indicated by the extent to which appelate decisions resulted in reversals of the district courts. -29- In Lakeside the Seventh Circuit reversed the district court and dismissed the case for want of personal jurisdic- tion. Two subsequent decisions by differ- ent panels of the Seventh Circuit, al- though also involving reversals of the district court, went the other way as it was held there was personal jurisidiction, to-wit: Wisconsin Electrical Mfg. Co. yv. Pennant Products, 619 F.2d 676 (7th Cir. 1980), and Biltmoor Moving & Storage Co. v. Shell Oil Co., 606 F.2d 202 (7th Cir. 1979) (rehearing en banc denied). These cases, read in conjunction with Lakeside, reveal that while there arguably may in- deed be a razor sharp line between offending and not offending Due Process in exercising jurisdiction over such commercial transactions, it is at best very difficult for district court judges and practicing lawyers to discern or predict that line in a given case. -30- The Due Process "rule of thumb” disclosed by this series of cases appears to be that it is only necessary to have the Lakeside contacts “plus” in order to be able to constitutionally exercise jurisdiction. Under the flexible International Shoe doctrine, the nature of the "plus" can and will vary from case to case. But there is insufficient guidance from this Court as to what will or will not suffice, to enable one to be able to predict litigation outcomes with any degree of reasonable certainty. Further, it is at least arguable that Lakeside and Jadair boil down to a per se physical presence requirement in all single interstate "transaction" (not single "act") commercial cases and/or a per se requirement of multiple “trans- actions." The factual setting in Wisconsin Electrical Manufacturing Co., supra, was nearly identical to the factual setting -31- in Lakeside (e.g., "single act" case) except that the out-of-state defendant's agents had been physically present in Wisconsin twice. The Seventh Circuit held that these additional contacts were sufficient (not necessary) to take the case outside of the Lakeside holding. Ironically, the very same district court judge who was reversed in Lakeside for holding there was jurisdiction, now was reversed for holding that there was not jurisdiction. 619 F.2d at 679. Further, since the court was treading very close to a de facto repeal of the International Shoe doctrine that a defendant need not be physically present in the forum State and a return to the Pennoyer v. Neff “presence” notions, the Seventh Circuit cautioned: "For the exercise of personal jurisdiction, the defendant need not have been physically present in the state, but need only have acted indi within the orum state. See Fisons, °32- Ltd. v. United States, 458 F.2d 1241, 1250-1252 (7th Cir.), cert. denied, 40S U.S. 1041, 92 S.Ct. 1312, 31 L.Ed.2d $81 (1972)." 619 F.2d at 678, n. 6. The decision below is in conflict with the above rationale and constitutes a return to Pennoyer v. Neff via what amounts to a per se rule requiring such physical presence in the forum state in single "transaction" cases. Here Keeler in effect acted "indirectly" within Wisconsin by entering into a contract with Jadair--knowing it was "inevitable" that Jadair would perform it in Wisconsin-- which caused Jadair to do certain manu- facturing-shipping acts in performance thereof within Wisconsin. Further, the numerous subsequent interstate "contacts" of Keeler with Wisconsin resulting from its on-going commercial relationship with with Jadair involving over a dozen repair- maintenance sub-transactions, renders o33@ Keeler's relationship with Wisconsin sufficient (i.e., constitutes the "plus”) for Due Process purposes under International Shoe and its progeny. The decision below also appears to be in conflict with the Seventh Circuit's decision in Biltmoor, supra. That was an action for breach of contract by a company hired to move a business to Texas. There too only one contract was involved (i.e., there not an ongoing business relation- ship). Nonetheless it was held Due Process was not violated. Adverting to the fact that the business was to be moved from its location in Illinois, that panel stated that the contract "absolutely required" performance* within Illinois, the forum state, and it was held that this "the District Court below ruled factually that since Jadair was only located in Wisconsin, it was "inevitable", although not "necessary" that Jadair's performance of its contract with Keeler would take place in Wisconsin. -34- fact was sufficient to take the case out- side of Lakeside. The Seventh Circuit added: "Illinois courts have not always distinguished between situations where the contract requires performance in Illinois and situations where, although the contract is silent, the defendant knows in advance that performance will take place in Illinois. The distinction is immaterial in this case because this contract absolutely required performance in Illinois, satisfying the standards of both the Illinois cases and the language of this court in Lakeside Bridge, 597 F.2d at 603.13." 606 F.2d at 207 (emphasis added). The District Court below found factually that Keeler knew in advance that performance by Jadair would take place in Wisconsin. Further, under the particular factual circumstances here, the distinction adverted to in Biltmoor is immaterial because the nature of the contract rendered performance by Jadair @3S@ in Wisconsin "inevitable" and "necessary." The nature of Jadair's contractual obli- gations meant that there was absolutely only one place where performance could eccur, to wit: Port Washington, Wisconsin. The Redi-Wash machine which Keeler pur- chased from Jadair is Jadair's propri- etary design and it is simply not made anywhere else in this country. Further, even if this distinction is deemed to be material in this case, under Due Process it should be sufficient that defendant- buyers know in advance that a sales- manufacturing contract will be performed in the forum state. The ultimate goal under Due Process fairness should be a lack of “surprise” resulting from un- expected fortutious contacts with a state, not technical contractual nice- ties (e.g., whether contract's boiler- plate expressly states seller must manu- facture goods in a given state). -36- Further, the decision below is in conflict with the rationale embraced in yet another recent Seventh Circuit case. The District Court below perceived the decision in Koster v. Automark Industries, 640 F.2d 77 (7th Cir. 1981), as having "further muddled"” the situation in this Circuit concerning this basic Due Process issue. However, the facts of Koster are in no way similar to the facts of the 2 The District Court below errone- ously relied on Koster as support for the proposition that in the present case it is not even a “significant factor" that the defendant knew the contract would be performed in Wisconsin. The District Court adverting to the "single act" decisions in Lakeside and Koster essen- tially reasoned that Keeler’s repre- sentatives did not come into the state and the sales contract did not expressly require performance in Wisconsin. The District Court also cited Whittaker Co ration v. United Aircraft Co ration, 482 F.2d 1079 (lst Cir. 1973) in support of its rationale of furthering a policy ef encouraging business transactions between residents of different states by barring seller-manufacturers from suing buyers in the former's home state--despite the Wisconsin legislature's unequivocal political-policy decision to the contrary in enacting Wisconsin's Long Arm statute. a37a present case. There, the contract had been executed in Italy and involved the purchase of goods manufactured in Switzer- land. Defendant's only contacts with the Netherlands were eight letters and possibly a telegram or transatlantic telephone call. The Seventh Circuit, following an Inter- national Shoe analysis (e.g., purposeful minimum contacts with the forum), dis- tinguished two Illinois cases whose holdings and relationales are in point here and squarely mandate that Due Process is not offended because (1) "performance of the manufacturing contract" was expected to occur wholly within "the forum state” and (2) the "performance of the contract" was carried out in Wisconsin and Keeler's interstate "contacts" with Jadair were "all that was necessary" for Keeler to be able "to achieve its [business] purposes" of having Jadair manufacture, sell and ship certain goods to ic from Wisconsin. -38- Pao Ifl. MBRAC! SONFLI iy Te TS COURT IN INTER- ATIONAL SHOE AND ITS PROGENY The decision below in effect (1) returns to Pennoyer v. Neff, 95 U.S. 714 (1877), notions of physical presence and technical contractual niceties which have long since been rejected by this Court with respect to all single inter- state commercial "transactions" (not just in single "act" cases) and (2) conflicts with International Shoe and its progeny. If Due Process cannot be satisfied in a single interstate business "transacton” under these particular factual circum- stances, it never can be. The Court of Appeals below viewed as decisive the factors that there was only one overall interstate "transaction" (even though there were numerous inter- state contracts and "contacts" involved therein) and that Keeler representatives had never physically come to Wisconsin in -39- connection with its ongoing business deal- ings with Jadair. The single "transaction" thesis is in conflict with this Court's substantial and not isolated "contacts" principle. Further, while physical pre- sence is many times a sufficient nexus with the forum state, it is hardly necessary--either as a per se rule or under the particular factual circumstances present here. Such a physical presence requirement constitutes a drastic retreat from International Shoe and McGee which ruled that interstate "contacts" can be sufficient --even in a "single act" con- text. It signals a return to the regime of Pennoyer v. Neff, in which the federal judiciary, espousing rigid mechanical legal concepts of physical power and physical presence, straight-jacketed the states’ attempts exercise their sovereignty by extending their Courts’ jurisdiction over corporate non-residents. Long ago the Pennoyer v. Neff ration- ale caused unjustifiable strain with respect to the demands of justice vis a vis an increasingly mobile, interstate, commercial-business structure in this country. Finally, about three decades ago in International Shoe Co. v. Washington, supra, this Court rejected the legal fictions at the heart of Pennoyer v. Neff and enunciated the standard that subse- quently has remained the touchstone for determining when it would not offend Due Process to subject a nonresident defendant to suit in the forum state--even when there is only a "single act” involved: "([Djue process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum he have certain minimum contacts with it such that maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice'’”. 326 U.S. at 316 (emphasis added). The decision below, which built upon and went well beyond Lakeside is in irreconcil- able conflict with not only the Inter- national Shoe and McGee holdings and ration- ales, but also with the rationales under- lying several recent decisions of this Court. Consider, for example, Note, Lakeside Bridge & Steel Co. v. Mountain State Construction _: Inflexible catio of “Arm Jurisdiction Standards to the Nonresident Purchaser, 76 Nw.U.L.Rev. 345 (1980), which pointed out, inter alia: "The court in Lakeside appeared to treat ‘minimum contacts’ concept as a physical contact requirement rather than a symbol of relationship with the forum state sufficient to sustain jurisdiction in harmony with due process demands and overall fairness (p. 347) "The court in side derived a distort standard as a result of its selective reading of relevant case law. Had -42<- the Seventh Circuit conducted a more complete survey of precedents and persuasive authority, it might have brought a balanced standard to its application of the law to the facts of Lakeside. Such a standard woul require a flexible exam- ination of all relevant factors in each case: the business or personal nature of the transaction; the nature and magnitude of the transaction; the foreseeability of litiga- tion in the forum state; the overall fairness of litigating in the forum state given the defendant's relationship to the state and impact on the state; and the interests of the plaintiff and the forum state. (p. 356) "... A flexible analysis would reveal that the defendant Mountain State did purposefully avail ' itself of the opportuni- ties and, consequently, the responsibilities of transacting business with the resident manufacturer. (p. 361) "... The court adopted a distorted standard, applied it too rigidly, and overlooked other -43- relevant factors.... A flexible analysis would necessitate looking beyond who initiated the contacts, who stepped over a state boundary line, and where goods ordered were specified to be manufactured. A court must examine the contract negotiations, consider the custom order nature of the transaction, recognize the commercial benefit to the parties of such a sizable contract, and accord sufficient weight to the interests of the forum state. These factors, as well as the reasonable expectation eof the defendant and the absence of any demonstra- ted unfairness, compel a result contrary to the Seventh Circuit's holding”. (p. 361). This critique is even more appropos vis a vis the decision below than Lakeside. The decision below is incompatible with the rationale embraced in Shaffer v. Heitner, 443 U.S. 186, 203-04, n. 20 (1977) where this Court reaffirmed the aforesaid International Shoe interstate "contacts" doctrine, explained its juxtaposition to Hanson v. Denckla, 357 U.S. 235 (1958), and then cautioned: echanical or quantitative evalua- tions o e 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 acti- vity in relation to the fair and orderly administration of the laws which it was the purpose of the due process clause to insure.'" The decision below which gave decisive weight to the lack of physical presence of Keeler's representatives in the forum state and the lack of multiple "trans- actions" is incompatible with the above standard. There is no necessary rational link between (1) physical presence in the forum state and the number of "trans- actions" and (2) basic Due Process reason- ableness-fairness--at least in a commer- cial context. What should be decisive -45- is the nature and extent of the inter- state "contacts," as well as whether or not buyers realize they are dealing with with manufacturers-sellers who are located and will be performing in the forum state.* Interestingly, in Shaffer, there was physical presence (i.e., of property) within the forum state, but this was held not to be sufficient "Thus, the relationship among the defendant, the forum, and the litiga- tion, rather than the mutually exclusive sover- eignty of the States on which the rules of Pennoyer rest, became the central concern of the inquiry into personal “consider in this regard the recent stimulating Due Process analyses and suggestions in Comment, Constitutional Limitations on the State Long Arm Juris- diction, supra, particularly the section dealing with commercial transactions which also is critical of the Lakeside doctrine (49 U. of Chi. L. Rev. at 173-79). The plethora of recent law review articles exploring this Due Process issue is mute testimony that this issue is ripe for resolution by this Court. jurisdiction." 433 U.S. at 204. The decision below also is in conflict with the rationale of Hanson v. Denckla, Supra, where it was held that a defendant must “purposely avail itself of the privi- lege of conducting activities within the forum State, thus invoking the benefits and protection of its laws." This princi- ple was satisfied by Keeler purposely entering into a sales contract with Jada#ir for the special manufacture of a large piece of complicated equipment, which it knew inevitably had to be performed in the forum state, and which was in point of fact performed there. As the Seventh Circuit itseif recently recognized in Wisconsin Electrical Manufacturing Co., Inc. v. Pennant Products, Inc., supra, it is sufficient if defendant-buyers “indirectly” so act within the forum state. Nonetheless, in the decision below the Seventh Circuit did not follow -47- this basic Due Process principle. Rather, it erroneously, in effect, returned to a wooden per se rule requiring direct physi- cal presence in the forum state and/or multiple "transactions." The authors of Comment, Federalism, Due Process, and Minimum Contacts: World-Wide Volkswagen Corp. v. Woodson, 80 Colum. L. Rev. 1341 (1980), recently had the following to say about the Supreme Court's purposeful affiliation standard enunciated in Hanson v. Denckla: "The Court has not agreed on the exact meaning and function of the purposeful affiliation requirement. See, e.g., Rosenblatt v. American cvapanid Co., 86 S.Ct. 1, 4 (Gol rg, J. denying day) appeal dismissed, 382 U.S. 110 (1964) (per curiam). On occasion, however, the Court has implied that the requirement insures that the exercise of jurisdiction is fair to the defendant in somewhat distinct respects. "First, there is the notion of ‘reciprocity’: that it is fundamentally unreasonable to subject a defendant to the burden of suit in a state from which he has neither derived nor attempted to obtain any benefit whatso- ever. See Kulko v. Ss rior Court, 436 U.S. 84, 101 (1978). Second, there is the rotion of "fair notice’: that a defendant should be subject to suit only ina state in which he reasonably could expect to be haled into court. See Shaffer v. Heitner, 433 U.S. 186, 216 (1977); Id. at 217-219 (Stevens, J., concurring)...." 80 Colum. L. Rev. at 1352, N. 89. (Emphasis added). Both aspects are easily satisfied here. However, the decision below not only failed to give any consideration to these two basic Due Process principles, but is in irreconcilable conflict therewith. The decision below conflicts with the first purpose of Hanson v. Denckla, by failing to give due weight to the substantial economic benefit that Keeler sought to and did derive from its numerous ongoing business "contacts" with Jadair in Wisconsin. Keeler is a large commercial -49- concern that purchased an expensive ($78,000) and very useful, but compli- cated, piece of equipment for use in its business. Keeler not only contemplated, but received a substantial economic bene- fit from its ongoing business relationship (e.g., re maintenance-repair) with Jadair. Likewise, the decision below conflicts with the second purpose of the Hanson v. Denckla principle. It was in a Due Process sense foreseeable to Keeler that its ongoing and substantial business relationship with Jadair might subject it to jurisdiction in a Wisconsin court. When a business corporation enters into a subcontractual contract with a manufacturer whose operations are all located ina particular state, which results in an ongoing business relationship involving many sub-transactions and a host of inter- state “contacts” with the forum State, that business corperation is in no posi- tion to claim "surprise" in a Due Process -50- sense when an action relating to the con- tract is instituted in that state after disagreements have erupted. Nor did Keeler even attempt to prove any such "surprise" in this case. Accordingly, the decision below also is in conflict with the rationale of Kulko v. California Superior Court, 436 U.S. 84, 92, 96-97 (1980) which is another "single act" case where the International Shoe doctrine was reaffirmed. It was emphasized that "the interests of the forum State and of the plaintiff in pro- ceeding with the cause in the plaintiff's forum of choice are, of course, to be considerea"™ and "In light of our conclu- sion that appellant did not sefully derive benefit i. any activi- ties relating to the "It is not without significance that the line of cases which the decision below is a part of, essentially involve federal courts overriding the will of the people of this country as expressed via their popularly elected legislatures’ enactment of “Long Arm" statutes. -Sil- State of California, it is apparent that the California Supreme Court's reliance on appellant's having caused an ‘effect' in California was misplaced. See supra, at 89, 56 L Ed 2d, at 139. This ‘effects’ test is derived from the American Law Institute's Restatement (Second) of Conflict of Laws §37 (1971), "While this provision is not binding on this Court, it does not in any event support the decision below. As is apparent from the examples accompanying §37 in the Restatement, this section was intended to reach ... or commercial activity affecting state resi- dents, ibid.... "... The cause of action herein asserted arises, not from the defendant's commercial transactions in interstate commerce, but rather from his personal, domestic relations." Here, Keeler's ongoing interstate com- mercial “transaction” led to this controversy; its choice to enter into the manufacturing contract caused "effects" in performance of that contract within Wisconsin by Jadair; and it purposefully derived commercial-business benefits from its “activities relating to the State of Wisconsin." Hence the decision below is in irreconcilable conflict with the above quoted basic Due Process principles enunciated by this Court. The decision below for the same reasons is in conflict with the rationale underlying Rush v. Savchuk, 444 U.S. 320, 327 (1980): "In short, it cannot be said that the defendant engaged in any puipesefus activity relat to forum that would make the exercise of jurisdiction fair, just, or reason- able, ...merely because his insurer does business there. "Nor are there significant contacts between the litigation and the forum." (Emphasis added) There is no room under the Rush principle for mechanical per se requirements that buyers such as Keeler must either, while physically in the forum state via its -53- representatives, have entered into a commercially nonsensical sales contract that expressly specifies that the goods must be manufactured in the forum state, or have entered into more than one "transaction." As to the first, this Court looked for "contacts with,” "the relationship among,” "purposeful activity related to” and “significant contacts between"--not for acts directly accom- plished by the defendant within the state in the physical sencs. As to the second, the focus was solely upon "traditional notions” of fair play and “substantial justice” geared to an analysis whether the defendant purposefully entered into a relationship with a state knowing that it was located in the forum state--not an examination of contracting technicalities and a mechanical counting of the number of "transactions." In -W Volk Corp. v. Woodson, 444 U.S. 286, 292-93 (1980), -54- this Court also followed the International Shoe analysis vis a vis the "coutacts” between defendants and the forum state in the context of considerations such as "fairness," "reasonableness," and the "forum state's interest in adjudicating the dispute,” emphasizing: "The limits imposed on state jurisdiction by the Due Process Clause, in its role as a guarantor against inconvenient litigation, have been substantially relaxed over the years. As we noted in pegee © Inter- pational Life Ins. Ge. s trend is largely attributable to a fundamental trans- formation in the American economy: ‘Today many commer- cial transactions touch two or more States and may involve parties separated by the full continent. With this increasing nationalization of commerce has come a great increase in the amount of ss ° it the sane time modern transportation -55- and communication have made it much 2888 © Edensome for a party to defend himself ina State where he engages in economic activity. ' "The historical develop- ments noted in McGee, of course, have only accelerated in the generation since that case was decided." 444 U.S. at 292 (emphasis added). The decision below ran directly counter to this “relaxing” trend and its ration- ale is completely out of step with the above principles that led thereto. CONCLUSION This case unequivocally poses this basic unresolved Due Process issue in a unique and undisputed factual setting which sharply focuses the material Due Process considerations. The issue is ripe for resolution by this Court, as lower courts and law review commentators have explored in depth the various con- siderations involved. There is a pressing -56- (ewe need for this Court to determine, inter alia, the proper role, if any, in the controlling Due Process methodology, of a requirement of “physical presence” and a requirement that there must be multiple "transactions." This Court should consider whether or not it is a sufficient inter- state connection with the forum state that a foreign business corporation purposely entered into a single substantial sales- manufacturing contract which it knew was going to be performed by the seller manu- facturing the goods in, and shipping the goods F.0.B. from, the forum state. Due Process jurisdictional decisions rendered by this Court to date yield only amorphous, and arguably conflicting, guidance vis a vis this basic issue which has resulted in oS7< continual litigation with widely conflict- ing results. Respectfully submitted, Counsel of Record ROSS R. KINNEY MARK E. SANDERS of Quarles & Brady 780 North Water Street Milwaukee, WI $3202 (414) 277-5000 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385009_0672%3A1. Public record. Not legal advice.