Petition for Writ of Certiorari — Duriron Co. v. Stephenson

:

% ~

CHARLES STEPHENSON, NorMAN Bakke, Er AL, oe

Tue Dunmon Company, Inc,, Petitioner es?

v. ee

Respondents 2s ee

PETITION FOR WRIT OF CERTIORARI ey

TO THE SUPREME COURT OF ALASKA ea

INDEX

Page

me re een eel ee 2

GrounD on WuicH Jurispiction Is INVOKED ......... 2

SI IID iis vc ckiknicnedesesanekedonscenees 2

CoNSTITUTIONAL Provision AND STaTUTE INVOLVED ..... 3

ORRIN GP TG GAM ok ois einks cccecncaacesansiases 4

REASONS FOR GRANTING THE WRIT ...............22. 9

1. The Alaska Supreme Court Has Decided a Fed-

eral Question of Substance in a Way Probably

Not in Accord With the Applicable Decisions of

ND SHUN 4640455000560 600sKeeweneeentesuns 9

2. Due Process Requirements in the Context of a

Foreign Corporation’s Amenability To Process

in Actions Grounded in Tort Is a Question of

Substantial Importance Subject to Divergent

Views Throughout the States Which Should Be

Definitively Resolved by This Court .......... 15

TABLE OF AUTHORITIES

CASES:

American Ou Co. v. Neill, 380 U.S. 451 (1965) ...... 12

Anderson v. Penncraft Tool Co., 200 F. Supp. 145

Serre errr ete Ne 15

Buckley v. New York Times, 338 F. 2d 470 (CA 5,

ED, t Diva $n 44354R 054544 440k Aaa coeds cans 17

Cooke-Waite Lab. Inc. v. Napier, 166 So. 2d 675 (Fla.

ee rere ere 17

Cosper v. Smith & Wesson Arms Co., 53 Cal. 2d 77,

| OA AR Ao, Peer er eon 15

Curtis Pub. Co. v. Cassel, 302 F. 2d 132 (CA 10,

MEE Gia. 6066 daa one h eee awe de ees ease ale eaeces 18

Index Continued -

Page

Del Ray Beach Aviation Corp. v. Mooney Aircraft,

332 F’. 2d 135 (CA 5, 1964) ........ cc ececeecees 17

a v. Rheem Mfg. Co., 319 F. 2d 124 (CA 2,

EE re rer er Pree

Donles! v. Whirlpool Corp., 234 F. Supp. 869 (E.D.

EA ee PrP rrr 17

Dooly v. Payne, 326 F. 2d 941 (CA 5, 1964) ........ 16, 17

DiMeo v. Minster Mach. Co., 225 ¥. Supp. 569 (D.

ie Ea Ser en 17

Ehlers v. U. 8S. Heating & Cooling Mfg. Corp., 267

Minn. 56, 124 N. W. 2d 824 (1963) ............ 15, 18

Erlanger Mills, Inc. v. Cohoes Fibre Mills, Inc., 239

F. 2d 502 (CA EE Adcccdnnddabdatesbencees 19

Essential Constr. Co... Royal Concrete i> ee

Inc., 84 N. J. Super. 289, 201 A. 2d 754 (1964) . 16

Feathers v. McLucas, 33 US.L.W. Se 17

Gray v. American Radiator & Standard Sanitary

Corp., 22 Ill. 2d 432, 176 N. E. 2d 761 (1961) ..7, 15,17

Green v. Robertshaw-Fulton Controls Co., 204 F.

Supp. 117 (S.D. Ind. 1962) .................... 18

Hanson v. Denkla, 357 U.S. 235 (1958) ........ 3, 10, 12,

Hearne v. Dow-Badische Chem. Co., 224 F. Supp.

Oe ER ED accu cvecccnceecnceasuceas

International Shoe Co. v. Washmgton, 326 U.S. 310

(1945)

Jupp v. Global Marine Exploration Co., 227 F. Supp. —

Se CU Ms BUND inane ccamcacses steeceess 16, 17

Local No. 438, Constr. & General Laborers’ Union

v. Curry, 371 US. 542 ere eee 2

Lone Star Motor Import, Inc. v. Citreon Cars Corp.,

185 F. Supp. 48 (S.D. Tex. 1960) ................ 16

McGee v. International Lafe Ins. Co., 355 U.S. 220

DUE ctcivctndacekesan auapuasaudewaed 10, 12, 13, 16

Mamn v. Equitable Gas Co., 209 F. Supp. 571 (N.D.

> Ferree eee 17

“a Nat. Bank vy. Langdeau, 371 U.S. 555

De cca g ied shavaahdatands shee taeneu aes keen 2

Moore-McCormack Lines, Inc. vy. Bunger Corp., 307

F. 2d 910 (CA 4, 1962) sa alien aaa at tata ra 16

Moss v. City of Winston-Salem, 254 N.C. 480, 119

TA By OD CUED ons oki dic ccceuecacevecentaus 17

Index Continued iii

Page

Newark Ladder ¢ Bracket Co. v. Eadie, 125 So, 2d

915 (Fla. Dist. Ct»App. 1961) .................. 17

Nigro v. Eagle Star Ins. Co., 216 F. Supp. 205 (E.D.

i WE csstueeiedsiacduaidas oivededed can: « 17

O’Brien v. Comstock Foods, Inc., 194 A. 2d 568 (Vt.

EN bi.550dakanenwus hac pceererbenneeswenned 16, 17

Pendzimas v. Eastern Metal Prods. Corp., 218 F.

Supp. 524 (D. Minn. 1961) ...................... 18

Webb v. Stanker ¢ Galetto, Inc., 84 N.J. Super. 178,

Fe S| RR Pera eee 16

Williams v. Connolly, 227 F. Supp. 539 (D. Minn.

DED Kaba ateucderth iuauaeds olausueous cic. 18

Wisconsin Metal & Chem. Corp. v. De Zurich Corp.,

222 F. Supp. 119 (E.D. Wis. 1963) .............. 16

Sratutes & Constrrutiona Provisions:

Alaska Stat. § 10.05.642 .......... cc ccc cece ccc eee 3, 4

Conn. Gen. Stat. Rev. § 33.411 (4) (1961) ......... 15

Ml. Ann. Stat. ch. 110, §17 (Smith-Hurd 1956) .... 15

Minn. Stat. § 303.13(13) (Supp. 1964) ............. 5

Tex. Rev. Civ. Stat. Art. 2031(b) (4) 2: ee 15

iS ye a |}: eae aoe ,4

CS 8 ee eee eee 4

Vt. Stat. Ann. tit. 12 § 855 (1959) ................ 15

IN THE

Supreme Court of the United States

OcToBER TERM, 1965

No.

THE DuRIRON CoMPANY, INC., Petitioner

v.

CHARLES STEPHENSON, NoRMAN Bakke, Et hy

Respondents

e)

ra

PETITION FOR WRIT OF CERTIORARI

TO THE SUPREME COURT OF ALASKA

To The Honorable the Chef Justice of the United

States and the Associate Justices of the Supreme

Court of the United States:

Petitioner, The Duriron Company, respectfully

prays for the issuance of a Writ of Certiorari to review

the judgment of the Supreme Court of Alaska, entered

May 3, 1965.

2

I

OPINION BELOW

The decision of the Superior Court, Third Judicial

District, of the State of Alaska, is unreported. A

copy of the order declaring that the Court had no

jurisdiction over petitioner is printed in the Appendix

14a-17a. The opinion of the Alaska Supreme Court

is reported at 401 P. 2d 423 (1965), and may be found

in the Appendix 1la-1l4a.

II

GROUND ON WHICH JURISDICTION IS INVOKED

The judgment of the Alaska Supreme Court was

entered on May 3, 1965. Rehearing was denied on

June 15, 1965. The jurisdiction of this Court is in-

voked pursuant to the provisions of 28 U.S.C. 1257 (3).

Petitioner is aware of the jurisdictional requirement

of finality contained in 28 U.S.C. 1257 (3). It is clear,

however, that the judgment in this case is final within

the interpretation of that requirement. Mercantile

Nat. Bank v. Langdeau, 371 U.S. 555, 558 (1963) and

Local No. 438, Construction and General Laborers’

Union v. Curry, 371 U.S. 542, 548-50 (1963).

Ill

QUESTION PRESENTED

This case was initiated in the state of Alaska as an

action grounded in tort. Petitioner, an Ohio manu-

facturer of pipes and valves: (1) has never had an

office, salesman, agent, servant or employee in the

state; (2) has never been authorized to do business,

nor, in fact, has ever transacted any business-in the

3

state; and (3) for the five years preceding the action

had only a fraction of 1% of its total gross sales enter-

ing the state by direct and indirect means. In these

circumstances, does not the assertion of in personam

jurisdiction over petitioner offend our ‘‘traditional

notions of fair play and substantial justice’ and

thereby violate due process under the standards estab-

lished by this Court in International Shoe Co. v. Wash-

ington, 326 U.S. 310 (1945) and Hanson v. Denkla, 357

U.S. 235 (1958) ?

IV

CONSTITUTIONAL PROVISION AND STATUTE

INVOLVED

United States Constitution—14th Amendment, Par.

1:

No State shall make or enforce any law which

_ shall... deprive any person of life, liberty or

property, without due process of law....

Section 10.05.642 of the Alaska Statutes:

When a foreign corporation authorized to transact

business in the state, or not authorized to transact

business in the state but doing so, fails to appoint

or maintain a registered agent in the state . . . the

commissioner is an agent upon whom process,

notice or demand may be served. Service on the

commissioner shall be made by delivering to and

leaving with him, or with a person designated by

him in the corporation department of his office,

duplicate copies of the process, notice or demand.

The commissioner shall immediately have one

copy forwarded by registered or certified mail, ad-

dressed to the corporation at its principal office in

the state or country under whose laws it is incor-

porated.

4

Vv

STATEMENT OF THE CASE

Petitioner, Duriron Company, a New York cor-

poration with headquarters in Dayton, Ohio, is

principally engaged in the manufacture and sale of

corrosion-resistant iron alloy pipes and fittings. (App.

4a). Although the company maintains various sales

offices throughout the country; no agent has ever

entered the state of Alaska to solicit or consummate

the sale of any of petitioner’s products. Moreover, the

company is not authorized to transact business in °

Alaska and therefore does not have an agent registered

in that state for receipt of service. (App. 4a)

This case’ was initiated by respondents for personal

injury and property damage caused by an alleged

explosion of escaped gas. (App. 2a) Petitioner was

made a party defendant on the basis of allegations that

it manufactured a valve which allegedly failed to meet —

requirements specified by the purchaser. (App. 2a)

Subsequent to-filing their complaint, respondents, pur-

suant to Section 10.05.642 of the Alaska Statutes,

caused process to be served on petitioner at its offices in

Dayton and in New York. Duriron immediately made

1Two separate complaints were filed. These were consolidated

by the trial judge and have at all times been treated as one.

Various amended complaints were also filed, which, for purposes

of the present petition, are of no import.

2Providing, inter alia, that ‘‘when a foreign corporation. . .

not authorized to transact business in the state but doing so, fails

to... maintain a registered agent in the state. . . the Commis-

sioner is an agent upon whom process... may be served.... The

commissioner shall immediately have one copy forwarded by

registered or certified mail, addressed to the corporation at its

principal office in the state or country under whose laws it is

incorporated. ”’

5

a special appearance in the trial court (R. (1) 85, 106a;

R. (2) 77, 93)* to contest its amenability to substituted

service on the basis that it had never ‘‘transacted busi-

ness’’ in the state as required by the statute. The con-

tention was also made that if the attempted service

was upheld, the resulting finding that the courts of

Alaska were vested with jurisdiction over petitioner

would deprive it of rights guaranteed by the due

process clause of, the fourteenth amendment and the

interstate commerce clause of the Constitution. (R.

(1) 86, 106b; R. (2) 78, 94).

The trial court found for the petitioner. On appeal,

however, the Alaska Supreme Court reversed, finding

that ‘‘no violation of due process [would] . . . result

from requiring it [petitioner] to defend”’ the suit.

(App. 14a). A timely motion for rehearing (specifically

objecting to the decision as not being in accordance

with decisions of this Court)’ was denied (Rec. (2)

133).

’ Due to the consolidation of the cases there are two separate

files. See note 1 supra. The number placed in parentheses indi-

cates the file in which cited material may be found.

* Petitioner contended: [T]he court is not vested with jurisdic-

tion over the Duriron Company, Inc. and process or orders in

contravention of the rights of said foreign corporation

(i) will impose a burden upon commerce among the State in

violation of Article 1, paragraph 8, clause 3, of the Con-

stitution of the United States, and

(ii). will deprive the Duriron Company, Ince. of its property,

without due process of law, contrary to the Fifth and

Fourteenth Amendments to the Constitution of the United

\ States.

ey 7

5 ‘‘Further;.appellee contends that the court has . . . misapplied

the requirement 6 inuous and systematic . . . as required by

International Shoe.’’ R. (2) 130.

6

The facts are not in dispute. During the five

years preceding the instant action petitioner’s busi-

ness contacts with the state were measured in

fractions of one percent of total sales. Products

which reached the state by direct and indirect

means, 1.¢e., sales to independent businesses located

outside the state which purchased petitioner’s prod-

ucts for resale to businesses in the state, were, as

compared to gross sales; 443/10,000ths of 1% in 1958;

508/10,000ths of 1% in 1959; 891/10,000ths of 1% in

1960; 462/10,000ths of 1% in 1961; and 265/10,000ths

of 1% in 1962. Included in these figures are five un-

solicited orders from three Alaska residents and a

facility of the United States Air Force based in Alaska

which, for the five years in question, represented

93/10,000ths of 1% of the gross sales of the company.

(App. 16a; R.(1) 72-6; R. (2) 66-70).

The transaction which gave risé to the sale of the

specific valve in question is included in the foregoing.

Delta Engineering Company, acting as an agent of

Anchorage Natural Gas Corporation, ordered the valve

along with other merchandise from the Vinson Supply

Company, loeated in Houston, Texas. Acting as an

independett contractor, Vinson had ordered the valve

from Duriron for resale. The invoice indicates that

the valve was sent directly to Anchorage Natural Gas

Corporation in Anchorage, Alaska. (App. 6a). The

place of sale was considered to be Dayton, Ohio. (R.

(2) 34).

Also important to the factual background of the case

are the activities of the Seattle office of the Duriron

Company and the activities of John T. Doherty &

Associates, a manufacturer’s representative located in

the same city. Doherty represented petitioner and at

least four other similar manufacturers. (Walter K.

7

Ramage Dep. 3). Although Deherty was authorized

to handle a substantial number of products manufac-

tured by petitioner, it had no authority to make quota-

tions or solicit business for any of Duriron’s valve

products. (Walter K. Ramage Dep. 16; Warran Bays

Dep. 26). Moreover, Doherty’s sole activity for the

benefit of Duriron in Alaska was the mailing of com-

pany catalogs (stamped with Doherty’s name) to inter-

ested persons and the sending of price quotations to two

Anchorage jobbers," (Walter K. Ramage Dep. 8, 10).

Directly representing Duriron in the sale of its valves

was its Seattle office. During the period in question

it had no business contacts with the state of Alaska.

(Warran Bays Dep. 18, 23-4).

In accordance with these facts the trial court found

that Duriron was neither physically nor constructively

engaged in business in the state and therefore not sub-

ject to service of process.’ The Alaska Supreme Court,

however, stated that ‘‘the fact that some of the pur-

* Various depositions were taken pursuant to the motion to

quash. They are included as part of the record.

7 Any orders which resulted from these activities were forwarded

to Duriron for approval.

5 The court stated, inter alia:

“*3. That from the year 1958 to the present time, Independ-

ent Contractors, in the furtherance of their own interests and

from places of business located outside the State of Alaska,

purchased merchandise of the Duriron Company, Inc., and

said Independent Contractors thereafter resold the merchan-

dise and shipped or caused the merchandise to be shipped to

persons in Alaska ;

4. That during the period of five years, 1958 through 1962,

three Alaska residents and a facility of the United States Air

Force, based in Alaska, mailed five unsolicited orders for goods

from the Duriron Company, Inc., which merchandise was

8

chases were made from independent middlemen or that

someone other than the manufacturer caused the

product to be shipped into the state are not controlling

factors.”’ (App. 13a). With this as a basic premise,

the Alaska Supreme Court relied on a recent de-

cision by the Illinois Supreme Court which held

‘‘that the use of .. . products in the ordinary course of

commerce is sufficient contact with [a] .. . state to

justify’’ a foreign corporation being subjected to the

jurisdiction of its courts in an action arising out of

injury caused by the product.’’ Gray v. American

Radiator d& Standard Sanitary Corp., 22 Ill. 2d 432,

436, 176 N. E. 2d 761, 766 (1961). On this basis the

court found what it considered to be the requisite

jurisdictional facts. To further bolster this conclusion

the court stated:

In the case before us the allegedly defective valve

manufactured by Duriron, was installed in the gas

mains of Anchorage... The explosion occurred

at or very near the place of the installation. All

of the other defendants... are located in Anchor-

age. Most of the witnesses who would testify

concerning the allegedly defective valve and its

installation and operation with relation to a

claimed lack of certain required couplings are

furnished by Duriron and represented 93/10,000ths of 1%

of the Duriron Company, Inc., during said five-year period;

5. That orders for merchandise of the Duriron Company,

Ine., required acceptance outside the State of Alaska before

becoming contracts which are binding on the Duriron Com-

pany, Inc.;

6. That no agent, servant or employee, acting in the course

and scope of employment by the Duriron Company, Inc.,

entered the State of Alaska or the Territory of Alaska at any

time heretofore, to solicit or consummate the sale of any pro-

ducts by the Duriron Company, Inc., to any person in the

State of Alaska; ....’’ (App. 13a-16a).

9

located in this area. It would appear to be far

more convenient to Duriron to defend the suits in

Alaska than to defend in Ohio and transport all

of the witnesses to that state from Alaska. The

convenience of the plaintiffs is likewise better

served by trial in Alaska for the same reason.

(App. 14a-15a).

VI

REASONS FOR GRANTING THE WRIT

1. The Alaska Supreme Court Has Decided a Federal Question

of Substance in a Way Probably Not in Accord With the

Applicable Decisions of This Court

This case involves a matter of great public concern,

a matter of importance not only to your petitioner but

also to all manufacturers throughout the United States.

The Alaska Supreme Court, in finding jurisdiction

over the petitioner, has extended its judieial power

far beyond the applicable decisions of this Court.

In International Shoe Co. v. Washington, 326 U.S.

310 (1945), the record clearly demonstrated that in

the State of Washington a foreign corporation had

eleven to thirteen salesmen under the direct super-

vision and control of the company earning commis-

sions based on the amount of their sales. This Court

held that the state had jurisdiction over the corpora-

tion in an action to recover payments due to an unem-

ployment compensation fund. In deciding that the

activities were sufficiently continuous and systematic

within the limitations imposed by the due process

clause, a new qualitative test was invoked which

stressed the reasonableness of requiring the nonresi-

dent to defend the particular suit:

[D]ue process requires only that in order to sub-

ject the defendant to a judgment in personam, if

he be not present within the territory ... he have

10

certain minimum contacts with it such that the

maintenance of the suit does not offend ‘“tradi-

tional notions of fair play and substantial justice.”’

. . Those demands may be met by such con-

tacts 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 cor-

poration to defend the particular suit which is

brought there. 326 U.S. at 316-17. (Emphasis

added.)

In 1957, this test was seemingly broadened by the

decision of McGee v. International Life Ins. Co., 355

U.S. 220 (1957). In deciding that a single contract of

insurance made by a nonresident corporation with a

resident of California was a sufficient ‘‘contact’’ with

the state to sustain jurisdiction, the Court relied upon

the ‘‘clearly discernible’’ trend toward expanding the

permissible scope of state jurisdiction over foreign

corporations—noting specifically the fact that ‘‘mod-

ern transportation and communication have made it

much less burdensome for a party sued to defend him-

self in a State where he engages in economic activity.”

355 U.S. at 223.

The broad, all-inclusive language contained in the

decision was substantially qualified in that same term,

however, by Hanson v. Denkla, 357 U.S. 235 (1958).

In deciding that Florida had no jurisdiction over a

Delaware trust company which carried on no activities

within the oa on cGee was distinguished on its facts.

Moreover, the jority of this Court specifically rein-

forced the holding in International Shoe by requiring

that ‘‘there be some act by which the defendant pur-

posefully avails itself of the privilege of conducting

activities within the forum State, thus invoking the

11

benefits and protections of its laws’’ 357 U.S. at 253.

(Emphasis added.) Moreover, an earlier dictum in

International Shoe indieating a parallel between

forum non convemens and the appropriate place of

trial under the due process clause was rejected: A

state court ‘‘does not acquire that jurisdiction by being

the ‘center of gravity’ of the controversy, or the most

convenient location for litigation.’’ 357 U.S. at 254.

Those restrictions [on in personam jurisdiction]

are more than a guarantee of immunity from in- .

convenient or distant litigation. They are a

consequence of territorial limitations on the

power of the respectwe States. However mini-

mal the burden of defending in a foreign tri-

bunal, a defendant may not be called upon

to do so unless he has had the ‘‘minimal con-

tacts’’ with that State that are a prerequisite

to its exercise of power over him. 357 U.S. at

251. (Emphasis added.)

Against the requirements stated in the decisions of

this Court, the Supreme Court of Alaska could never

have based its finding of jurisdiction on the inconse-

quential activities of petitioner’ as shown in the record.

Rather, the decision reflects a clear evasion of this

problem in favor of what amounts to a declaration of

per sé jurisdiction on the basis of: (1) the fact that

the product causing injury was placed into the

‘stream of commerce’’; and (2) an ‘‘estimate of con-

veniences’’—Alaska being found to be the most con-

venient forum.

*It should be noted that the court substantiated the decision

with completely irrelevant facts, i.c., that subsequent to the time

the complaints were filed: (1) Doherty followed the practice of

sending a representative to Alaska; and (2) the branch office of

Duriron expanded its sales district to include Alaska.

12

’

This Court is yet to intimate that the mere act of

placing goods into commerce, in and of itself, is suffi-

cient to give a state jurisdiction over a foreign corpo-

ration if the manufactured product causes injury with-

in a forum state. Cf. American Oil Co. v. Neill, 380

U.S. 451 (1965). McGee is by far the most liberal

extension of the due process clause—sustaining juris-

diction when the sole contact forming the basis of juris-

diction was the making of an insurance contract with

a resident. As noted, however, the decision was dis-

tinguished on its facts by Hanson, and every distin-

guishing factor noted in the latter decision is present

im the instant case.

First, the Court in Hanson noted that the cause

of action in McGee arose out of a transaction hav-

ing its situs in the forum state, 1.e., the insur-

ance contract was consummated in California. In

the instant case it is undisputed that the specific

valve in question was sold to an independent con-,

tractor in Houston, Texas, which, acting for its own

businesses purposes, purchased the valve for resale.

Therefore, the physical aspects of the sale had no con-

nection with the State of Alaska.

Second, the Court in Hanson found that in McGee the

nonresident defendant solicited the insurance agree-

ment with the California resident. In contradistinction

to this, the record in this case demonstrates that not

only was there a lack of solicitation by petitioner in the

State of Alaska related to the sale of the valve in

question—but further that at no time had there been

solicitation activities related to any of petitioner’s valve

products conducted in the state.

Finally, the Court in Hanson found that a relevant

consideration in McGee was the fact that the State of

13

California had manifested its interest in providing

effective redress for its residents when nonresident

insurers refused to pay claims on insurance they have

solicited in the state by enacting special legislation

(The Unauthorized Insurers Act). Although it could

be argued in the instant case that the state has

a “special interest’’ in tortious injuries incurred by its

residents which is comparable in degree to its interests

in protecting residents from foreign insurers, no special

legislation has been enacted by: the State of Alaska

which specifically embodies this interest. Rather, we

are dealing with an ordinary substituted service stat-

ute providing for service on foreign corporations

‘‘transacting business’’ in the state.

The decision, therefore, can find no justification

under the broad language of McGee. Moreover, and of

utmost importance, it flatly contradicts the standards

for in\personam jurisdiction as set forth in Hanson.

There is not the slightest suggestion that Durion has

ever availed itself of the ‘‘benefits and protections’

from the laws of Alaska. At no time did it permit any

of its officers, agents, servants or employees to enter

the state for purposes of solicitation; every sale made

which resulted in its products entering the state was

either to independent businesses located outside its

territorial confines or to businesses therein which

placed their orders without benefit of solicitation by

petitioner ; and no solicitation activity was undertaken

for the sale of any of its valve products. — <

The only activity that could possibly be considered

as solicitous was. the sending of catalogs into the State

of Alaska by Doherty, the manufacturers’ representa-

tives located in Seattle. The thinness of this reed is

14

reflected by the fact that the Alaska Supreme Court

was unable to make it the determinative factor in the

ease. Doherty had no authority to solicit, sales for

Duriron’s valve products; it sent the catalogs only to

interested persons; and the catalogs were sent under

Doherty’s own auspices, i.e., with its name stamped on

the outside cover. Moreover, little need be said con-

cerning the ‘‘continuous and systematic’”’ quality of

the activity. The record fails to bear out the fact

that ‘‘substantial’’ business was generated thereby.

Furthermore, although the amount of Duriron prod-

ucts finding their way into the state was measured in

fractions of one percent of gross sales, during the last

two years in question total sales were decreasing. This

fact bears out the effectiveness of Doherty’s activities.

Finally, there is no substance in the proposition by

the court below that due process boundaries may be

extended by the ‘‘estimate of conveniences”’ test. No

one can dispute that Alaska is the most convenient

forum for litigation. As noted, however, the majority

of this Court in Hanson specifically rejected this factor -

as a consideration. It therefore has no legal justifica-

tion.

15

2. Due Process Requirements in the Context of a Foreign Cor-

poration’s Amenability to Process in Actions Grounded in

Tort Is a Question of Substantial Importance Subject to

Divergent Views Throughout the States Which Should Be

Definitively Resolved by This Court

The question of states’ jurisdiction over foreign cor-

porations has always been difficult. Under the deci-

sions of this Court a bewildering variety of standards

have resulted,” and in the field of tort actions there

has developed a growing abuse of jurisdictional

power." This case is a classic example of such abuse.

1° Since the expansion of the jurisdictional concept from ‘‘doing

business’’ to ‘‘minimum contacts’’ various state legislatures have

passed substituted service statutes purporting to exploit the due

process clause to its fullest extent. See, e.g., Minn. Stat. § 303.13

(13) (Supp. 1964) ; Vt. Stat. Ann. tit. 12 § 855 (1958) ; Tex. Rev.

Civ. Stat. Art. 2031(b) (4) (1961) (rendering a corporation liable

for torts committed ‘‘in whole or in part’’ within the forum state).

Connecticut renders a corporation amenable to process for “‘tort-

ious conduct in this state, whether arising out of repeated activity

or Single acts, and whether arising out of misfeasance or nonfeas-

ance.’’ Conn. Gen. Stat. Rev. § 33-411(e) (1961). See also IL.

Ann, Stat. ch. 110, §17 (Smith-Hurd 1956). Other states have

found revision of their statutes unnecessary; the courts interpret-

ing the existing statute to permit full utilization of jurisdictional

power. See, ¢.g., Cosper v. Smith & Wesson Arms Co., 53 Cal. 2d

77, 346 P. 2d 409 (1959).

11 Exemplifying the ultimate result of disregarding the pro-

nouncements of this Court requiring corporate activity in a state

prior to its exertion of jurisdiction is Anderson v. Penncraft Tool

Co., 200 F. Supp. 145 (N.D. Ill. 1961). Pursuant to the Gray

decision, the court concluded that there was jurisdiction in all

instances over foreign corporations whose products caused injury

in the state unless it was shown that it was not ‘‘contemplated’’

tkat the product would be used in Illinois. Minnesota is essentially

in accord Ealers v. U.S. Heating & Cooling Mfg. Corp., 267 Minn.

56, 124 N.W.2d 824 (1963).

16

Seven years have elapsed since this Court’s deci-

sions in Hanson and McGee. Their impact upon a

state’s constitutional power to submit foreign corpo-

rations to jurisdiction is yet to be clearly delineated,”

and a substantial number of state courts interpreting

state service or process statutes which purport to go

12 Those states which hold that the mere introduction into com-

merce of a product is sufficient to sustain jurisdiction when injury

is caused within the forum state rely explicitly on Gray and its

emphasis on the McGee case. Cf., Wisconsin Metal & Chemical

Corp. v. DeZurik Corp., 222 F. Supp. 119 (E.D. Wis. 1963), where

the court specifically rejected a contention that McGee should be

viewed with the special interest of the state in mind. Thereafter,

the court proceeded to limit Hanson. Other courts view the ques-

tion differently.

In Dooly v. Payne, 326 F. 2d 941, 943 (CA 5, 1964), it is stated:

‘‘The McGee case was followed in the same term by Hanson...

which teaches that, although the door of non-resident jurisdiction

has been opened wider by International Shoe and McGee, it has

not been removed from its hinges and that it is stated to be the

Tule that ‘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, thus invoking the

benefits and protections of its laws.’ ”’

In Webb v. Stanker & Galetto, Inc., 84 N.J. Super. 178, 201 A.

2d 387 (1964), the court refused to recognize the expansion in

other jurisdictions of the due process concept and stated that the

furtherest extension of jurisdiction based on isolated activities was

in the insurance field, citing McGee. In the same year Essential

Constr. Co. v. Royal Concrete Fireproofers, Inc., 84 N.J. Super.

289, 201 A. 2d 754 (1964) was decided. This case noted that

although the cause of action arises in the state it is not determina-

tive unless there are other contacts sufficient to support jurisdiction.

See also, Moo e-McCormack Lines, Inc. v. Bunger Corp., 307 F. 2d

910 (CA 4, 1962); Devany v. Rheem Mfg. Co., 319 F. 2d 124

(CA 2, 1963) ; O’Brien v. Comstock Foods, Inc., 194 A. 2d 568 (Vt.

1963) ; Jupp v. Global Marine Exploration Co., 227 F. Supp. 604

(E.D. La. 1964); Lone Star Motor Import, Inc. v. Citron Cars

Corp., 185 F. Supp. 48 (S.D. Tex. 1960) (specifically noting the

conflict on this point).

B

“

ai

17

the ‘‘constitutional limit’’ are in direct conflict with the

decision by the Alaska Supreme Court.”

18 The District Court in Connecticut refused to abandon, in the

absence of a showing of sufficient corporate contacts, the state

conflicts of laws rule that a tort is committed where the negligence

first occurs. DiMeo v. Minster Mach. Co., 225 F. Supp. 569 (D.

Conn. 1963). A decision from West Virginia is in accord. Mann

v. Equitable Gas Co., 209 F. Supp. 571 (N.D. W. Va. 1962). New

York has recently held that although its statute and the Illinois

statute are similar, a foreign corporation in that state is only

amenable to process when a tortious act is committed in the state—

other contacts lacking. On the basis of legislative intent the Gray

analysis—which abandons the distinction as to where a tort is

‘‘committed’’ was rejected. Feathers v. McLwucas, 33 U.S.L.W.

2649.

The courts of Florida, although their statute goes to the full

extent permitted by the due process clause, Del Ray Beach Aviation

Corp. v. Mooney Aircraft, 332 F. 2d 135 (CA 5, 1964), have refused

to take jurisdiction over foreign corporations unless corporate

activities are clearly demonstrated by the record. Newark Ladder

& Bracket Co. v. Eadie, 125 So. 2d 915 (Fla. Dist. Ct. App. 1961) ;

Cooke-Waite Lab., Inc. v. Napier, 166 So. 2d 675 (Fla. Dist. Ct.

App. 1964). -

The Louisiana interpretation of its statute is that it goes to the

permissible limits of the due process clause. Buckley v. New York

Times, 338 F. 2d 470 (CA 5, 1964), but the requirement is still

retained that a plaintiff allege and prove corporate activity in the

state sufficient to give the court jurisdiction. Jupp v. Global

Marine Exploration Co., 227 F. Supp. 604 (E.D. La. 1964) (noting

that the percentage of business of defendant corporation was on

the increase each year) ; Nigro v. Eagle Star Ins. Co., 216 F. Supp.

205 (E.D. La. 1963) (dismissing on the basis that no jurisdic-

tional facts were alleged and proved). Vermont is in accord.

O’Brien v. Comstock Foods, Inc., 194 A. 2d 568 (Vt. 1963). Cf.,

Hearne v. Dotb-Badische Chem. Co., 224 F. Supp. 90 (S.D. Tex.

1963).

North Carolina, in a case directly comparable with Gray, refused

jurisdiction on due process grounds. Moss v. City of Winston

Salem, 254 N.C. 480, 119 S.E. 2d 445 (1961).

Michigan like many other states holds that its statute is a

codification of International Shoe and requires continuous solici-

tation. Donley v. Whirlpool Corp., 234 F. Supp. 869 (E.D. Mich.

1964). Alabama is comparable. Dooly v. Payne, 326 F. 2d 941

(CA 5, 1964). . .

18

Some opinions have included a specific request for

elarification of the constitutional standards by this

Court. For example, in Pendzimas v. Eastern Metal

Prods. Corp., 218 F. Supp. 524 (D. Minn. 1961), the

issue was presented whether a foreign manufacturer of

electric cookers was subject to service of process on

the basis that one of its products caused injury in the

state. The corporation had no officers or agents in

the state and no evidence was presented concerning the

amount of business done therein. After noting that

under Minnesota law the defendant would be subject

to the jurisdiction of the court, the district judge

refused to follow state law on the basis that it would

deprive the corporation of its rights under the due

process clause. In dismissing the case he concluded

‘‘with the hope that this matter may reach the Court of

Appeals and ultimately the Supreme Court so that the

question finally may be set to rest.’”’ 218 F. Supp. at

529-30."*

It is clear that the present case and some of the

other recent decisions of state courts have moved to the

point of establishing an all-inclusive jurisdiction over

foreign corporations in almost total disregard of the

due process clause. The results are an abuse of judi-

cial process, forum shopping and a multiplicity of ~

vexatious suits which can be resolved only by the au-

14 This decision has resulted in a direct conflict in the judicial

district. See Williams v. Connolly, 227 F.Supp. 539 (D. Minn.

1964). The Supreme Court of Minnesota, in determining that

there was jurisdiction over a foreign manufacturer of boilers, spe-

cifically noted that this Court has failed to define the constitutional

standards applicable in a tort action. Ehlers v. U. 8. Heating &

Cooling Mfg. Corp., 267 Minn. 56, 61, 124 N.W. 2d 824, 827 (1963).

Other decisions expounding the difficulties in this area are numer-

ous. See e.g., Green v. Robertshaw-Fulton Controls Co., 204 F.

Supp. 117, 126 (S.D. Ind. 1962); Curtis Pub. Co. v. Cassel. 302

F, 2d 132, 135 (CA 10, 1962).

19

thoritative decision of this Court. This is the problem

to which Judge Sobeloff referred so pointedly a few

years ago:

If one State may, without violation of the due

process clause, extend the authority of its courts

beyond its boundaries over persons and situations

not sufficiently related to that State, the separate

identity of the States will be reduced to a mere

fiction. Individual states could undertake at the

expense of other States to enlarge the sphere of

their authority to nationwide dimensions. It re-

quires no flight of fancy to foresee the resulting

maze of lawsuits adjudicating the interests of per-

sons having only the faintest and most remote links

with the State exercising authority. If the due

process clause is not effective to restrain such ex-

tensions of local power, then the federal system is

likely to be transformed into something very dif-

ferent from anything we have known.”

Without the decisive guidance of this Court the condi-

tions typified by this case will grow in seriousness and

harmful effect.

CONCLUSION

For the foregoing reasons, this petition for certiorari

should be granted.

Respectfully submitted,

P. EUGENE SMITH

206 Talbott Tower

Dayton 2, Ohio

Of Counsel: Counsel for Petitioner

LAIDLER B. MACKALL

JOHN E. NOLAN, JR.

1250 Connecticut Avenue, N. W.

Washington, D. C. 20036

15 Erlanger Mills, Inc. v. Cohoes Fibre Mills, Inc., 239 F. 2d 502,

509 (CA 4, 1956).

la

APPENDIX

THE SUPREME COURT OF THE STATE OF ALASKA

File No. 482

CHARLES STEPHENSON, ET AL., Appellants,

v.

THE Duriron Company, Inc., Appellee,

and

NorMAN BAKKE, ET AL., Appellants,

v.

THe Duron Company, Inc., Appellee.

Opinion

[ No. 289—May 3, 1965]

Appeal from the Superior Court of the State of Alaska,

Third Judicial District, Anchorage,

Edward V. Davis, Judge.

Appearances: John M. Savage, Clark and Savage, Anchor-

age, for Appellants. Robert C. Ely, Ely, Guess, Rudd

and Havelock, Anchorage, and P. Eugene Smith,

Marshall and Smith, Dayton, Ohio, for Appellee The

Duriron Company, Inc.

Before: Nesbett, Chief Justice, Dimond and Arend,

Justices.

Nessett, Chief Justice.

The single question before us is whether the appellee

foreign corporation has transacted business in Alaska

within the meaning of that term as defined by this court in

2a

Northern Supply, Inc. v. Curtiss-Wright Corporation’ and

as defined by accepted authorities,

On March 16, 1962, the appellant Stephenson switched on

a light in his apartment which set off an explosion of

escaped gas. The apartment house burned to the ground.

Appellants sued for personal injuries and property damage

caused by the explosion and fire. The number of defendants

was expanded until it included the supplier of the gas, the

supervisors and contractors who installed the pipeline and

the manufacturer of the allegedly defective valve.

This appeal concerns only the defendant The Duriron

Company, Inc., manufacturer of the valve claimed to have

permitted the gas leak which caused the explosion.

In Northern Supply, Inc. v. Curtiss-Wright we recognized

that Alaska’s corporation act was patterned after the

Model Business Corporation Act and pointed out that

AS. 10,05.600 of Alaska’s act, which names certain business

activities that a foreign corporation may engage in without

being considered to be transacting business in the state,”

was intended to pertain only to the transaction of business

as it relates to the power of the state to require the foreign

corporation to obtain a certificate of authority. We

emphasized that AS 10.05.600 does not purport to define

those activities which may subject a foreign corporation to

t Opinion No. 271, $97 P. 2d 1013 (Alaska 1965).

2 AS 10.05,600 in pertinent part states:

Without excluding other activities which may not constitute

transacting business in the state, a foreign corporation does

not transact business in the state by carrying on any of the

following activities: . ..

(5) effecting sales through independent contractors; .. .

(9) transacting business in interstate commerce ;

(10) conducting an isolated transaction completed within a

period of 30 days not in the course of a number of re-

peated transactions of like nature.

3a

the jurisdiction of Alaska’s courte under the provisions

of AS 10.05.642." We said that a foreign corporation could

very well be transacting business of such a nature that it

was not required to obtain a certificate of authority under

AS 10,05.600 but that the same business could be sufficient

under AS 10,05.642 to subject the foreign corporation to

the jurisdiction of Alaska’s courts. We construed the words

‘*transact business’? in AS 10.05.642 as encompassing all

those activities which would subject a foreign corporation

to the jurisdiction of our courts when measured by the

outer limits of the due process clause of the federal con-

stitution.‘

The facts must now be examined to determine whether

The Duriron Company, Inc., had sufficient contact with

Alaska so as to make it reasonable and just, according to

the traditional conception of fair play and substantial

justice that Alaska should exercise jurisdiction after service

of process on the Commissioner of Commerce who in turn

® AS 10.05.642 states:

When a foreign corporation authorized to transact business in

the state, or not authorized to transact business in the state

but doing so, fails to appoint or maintain a registered agent

in the state, or when a registered agent cannot with reasonable

diligence be found at the registered office, or when the @er-

tificate of authority of a foreign corporation is suspended or

revoked, the commissioner is an agent upon whom process,

notice, or demand may be served. Service on the commissioner

shall be made by delivering to and leaving with him, or with

a person designated by him in the corporation department of

his office, duplicate copies of the process, notice, or demand.

The commissioner shall immediately have one copy forwarded

by registered or certified mail, addressed to the corporation at

its principal office in the state or country under whose laws it

is incorporated. Service on the commissioner is returnable in

not less than 30 days.

* Northern Supply, Inc. v. Curtiss-Wright Corp., supra note 1,

at 1016-17.

ain .

4a

served appellant by mail, and fores Duriron to defend

against plaintiffs’ claims for relief in Alaska’s courts.

Duriron is a New York corporation with headquarters

in Qayton, Ohio, and is engaged in the manufacture and

sale of corrosion resistant iron alloy pipes and fittings.

Duriron products are distributed throughout the United

States by the use of district sales offices, manufacturer’s

representatives and plumbing jobbers. It is not authorized

to transact business in Alaska and does not have and never

has had a registered agent in the state for the receipt of

service of process. No agent of Duriron has ever entered

the Territory or State of. Alaska to solicit and consummate

the sale of any Duriron product.

Duriron’s products found their way into Alaska in

undetermined quantities by various methods. One effective

method was through the efforts of Duriron’s manufac-

turer’s representative, John T. Doherty & Associates of

Seattle. Doherty sent catalogs of Duriron products,

printed by Duriron but stamped with Doherty’s name, to

engineers, architects and plumbers in Alaska. Doherty

also sent quotations on any particular job to two Anchorage

jobbers, Yukon Supply Company and Susitna Plumbing and

Heating. Orders from these sources were sent to Doherty,

who forwarded them to Duriron for approval. Upon

acceptance a commission was paid to Doherty. Although

subsequent in time to the facts which created the issue

before us, it does appear from the record that since

August of 1963 John Doherty Company has apparently

followed the practice of sending a sales representative to

Alaska to represent Doherty in selling Duriron products

in Alaska.

The record reveals that on a number of occasions Delta

Engineering Corporation of Houston, Texas, acting as an

independent contractor, sent its purchase orders to sales-

men of Duriron located in Houston, for products offered

for sale by Duriron, for shipment to Delta in care of

5a

Anchorage Natural Gas Corporation, Anchorage, Alaska;

that Duriron would ship the merchandise from Dayton,

Ohio to Delta in accordance with instructions, and that

payment would thereafter be made to Duriron by Delta.

Vinson Supply Company of Houston, Texas, acting as an

independent contractor, on several occasions during 1960,

1961 and 1962, mailed written purchase orders from

Houston to salesmen of Duriron also located in Houston,

for Duriron products; that Duriron would ship the mer-

chandise from Dayton to Delta Engineering Company in

care of Anchorage Natural Gas Corporation, Anchorage,

Alaska pursuant to instructions contained in the purchase

orders and that the purchase price would thereafter be

paid by check from Vinson to Duriron in Dayton.

In April of 1962 and again in March of 1963 Anchorage

Natural Gas Corporation ordered merchandise from

Duriron directly. These orders were accepted by Duriron.

The merchandise was shipped to Anchorage Natural Gas

Corporation at Anchorage and remittance was made by the

gas corporation to Duriron at Dayton. On the other hand,

Duriron refused to accept one order for merchandise mailed

by Anchorage Natural Gas Corporation to Duriron in J uly

of 1962.

Duriron summarizes those sales of its merchandise

which are known to have reached Alaska in the years pre-

ceding the filing of this suit as follows:

In 1958 three Seattle companies purchased products from

Duriron costing $5,602.84, and either shipped or caused

Duriron to ship the products to a business in Alaska.

In 1959 four Seattle companies purchased products from

Duriron costing $982.07, and either shipped or requested

Duriron to ship the products to Alaska. In addition, in

1959, Duriron filled orders received directly from one

Alaska company and a United States Air Force facility

totaling $5,899.75.

6a

In 1960, Seattle and Houston companies made purchases

from Duriron totaling $14,717.49, and shipped or requested

that Duriron ship the products to a business in Alaska.

Also in 1960 one company and a United States Air Force

facility made purchases from Duriron totaling $529.32.

In 1961 Seattle, Tulsa and Houston companies made

purchases from Duriron totaling$7,404.30, and shipped or

requested Duriron to ship the products to Alaska. ~

In 1962 Houston and Seattle companies made purchases

totaling $3,627.06 from Duriron, and shipped or requested

that Duriron ship the products to a business in Alaska.

Also, in 1962 Duriron filled one unsolicited order received

direct from a company in Alaska totaling $630.64.

During the above years Duriron’s total gross annual

sales in all areas of the world varied between twelve and

seventeen million dollars.

It seems agreed that the valve involved in this action

arrived in Alaska after Delta Engineering Company, a

Texas Corporation acting as agent for Anchorage Natural

Gas Corporation, had ordered it along with other mer-

chandise from Vinson Supply Company, also of Texas.

Acting as an independent contractor, Vinson had ordered

the valve from Duriron for resale. The invoices reveal that

the products were to be sent by Duriron directly to

Anchorage Natural Gas Corporation in Anchorage.

Since March of 1962 Duriron has maintained a branch

office in Seattle, Washington, to serve a sales district cover-

ing several northwest states. This sales district was

expanded to include Alaska on January 1, 1963.

On the basis of the foregoing facts the trial court found

that Duriron did not have the necessary minimum contacts

with the State of Alaska and that its courts could not

exercise jurisdiction over the corporation. Duriron’s

motion to quash the summons was granted.

Ta

Since the decision of the United States Supreme Court

in Pennoyer v. Neff,® the power of»state courts to exert

jurisdiction over foreign corporations has been steadily

expanded by certain landmark decisions. These will be

mentioned in the chronological order of their publication:

In International Shoe Co. v. State of Washington® a

foreign corporate manufacturer of shoes employed sales-

men resident in Washington to solicit orders there.

Service of a notice of assessment for unpaid contributions

to the state unemployment compensation fund was per-

sonally served upon one of the company’s solicitors in

Washington. A copy was also mailed to the company at

its offices in Missouri. On special appearance the company

argued that it was not doing business within the state and

that it had no agent within the state upon whom service

of process could be made. The court emphasiz@d that the

activities of the corporation in Washington were continuous

and systematic and that its operations resulted in a large

volume of interstate business. Also, the company received

the benefits and protection of the laws of the state, in-

cluding the right to use its courts. Such operations were

held to establish sufficient contacts with the state “‘. . . to

make it reasonable and just according to our traditional

conception of fair play and substantial justice to permit

the state to enforce the obligations which appellant has

incurred there.’” The court found that its requirement

that the method of service employed must give sufficient

notice had, been satisfied.

In Perkins v. Beguet Consolidated Mining Co. the

defendant Philippine corporation’s gold and silver mining

activities had been completely halted by the war. The

595 U.S. 714, 24 L. ed. 565 (1878).

® 326 U.S. 310, 90 L. ed. 95 (1945).

7 Id. at 320, 90 L. ed. at 104,

8342 U.S. 487, 96 L, ed. 485 (1952).

Sa

president, who was also general manager and principal

stockholder, maintained a corporation office in his home in

Ohio from which he transacted corporate business with the

assistance of two secretaries. Substantial corporate

accounts were maintained in several Ohio banks, but none

of the corporate business concerned any corporate

properties in Ohio, The court held that under these facts

federal due process would not be violated for Ohio either

to take or decline jurisdiction of the corporation where the

president had been personally served in Ohio in a suit

against the corporation by a stockholder.

In McGee v. International Life Insurance Co.’ deceased,

a resident of California, had life insurance originally issued

by mail by an Arizona company whose obligations had later

been assumed by a Texas company. The beneficiary

obtained a judgment on the policy in California and sued

on the judgment in Texas. The Texas court refused to

enforce the judgment on the ground that it was void under

the Fourteenth Amendment because service of process out-

side California could not give jurisdiction to the courts of

that state. The Supreme Court reversed the judgment of

the Texas court and held that it was sufficient for the pur-

poses of due process that the beneficiary’s suit was based

on a contract which had a substantial connection with Cali-

fornia. Neither insurer had ever had an office or an agent

in California, nor had either ever solicited any business in

California, or for that matter done any insurance business

in California with the exception of the policy there involved.

In Hanson v. Denckla® the United States Supreme Court

commented on its previous decisions as follows:

In McGee the Court noted the trend of expanding

personal jurisdiction over nonresidents. As _ tech-

* 355 U.S. 220, 2 L. ed. 2d 223 (1957).

10 357 U.S. 235, 2 L. ed. 2d 1283 (1958).

9a

nological progress has increased the flow of commerce

between States, the need for jurisdiction over non-

residents has undergone a similar increase. At the

same time, progress in communications and transporta-

tion has made the defense of a suit in a foreign tribunal

less burdensome. In response to these changes, the

requirements for personal jurisdiction over non-

residents have evolved from the rigid rule of Pennoyer

v. Neff . . . to the flexible standard of International

Shoe Co. v. Washington. . .. But it is a mistake to

assume that this trend heralds the eventual demise of

all restrictions on the personal jurisdiction of state

courts. . . . Those restrictions are more than a

guarantee of immunity from inconvenient or distant

litigation. They are a consequence of territorial

limitations on the power of the respective States.

» However minimal the burden of defending in a foreign

‘ tribunal, a defendant may not be called upon to do so

unless he has had the ‘‘minimal contacts’’ with that

State that are a prerequisite to its exercise of power

over him.” [Citations omitted.]

The above mentioned decisions were ably reviewed in

the recently decided case of Gray v. American Radiator and

Standard Sanitary Co¥poration.2 There an Illinois resi-

dent sued for injuries caused by a water heater explosion.

A foreign corporation had manufactured the allegedly

defective safety valve in Ohio. The valve was assembled

into the water heater in Pennsylvania and the heater was

eventually sold to the plaintiff consumer in Illincis.

An Illinois statute provided that any nonresident who,

either in person or through an agent, committed a tort

within the state was considered to have submitted himself

to its jurisdiction and could be served personally outside

11 Td. at 250-51, 2 L. ed. 2d at 1296.

12 22 Ill. 2d 432, 176 N.E. 2d 761 (1961).

10a

the jurisdiction. The court held that the alleged negligence

in manufacture of the valve could not be separated from

the resulting injury and that the tort must be considered as

having been committed in Illinois.

It then went on to consider the question of whether per-

mitting service outside the state, where the defendant had

no agent or employee in Illinois, and where the injury was

his only contact with the state, exceeded the limits of due

process. In deciding this question it was pointed out that

the factor of whether or not the foreign corporation did

a substantial volume <f business in the state, relied on by

the court in International Shoe had been minimized as a

requirement by the later decision of the United States

Supreme Court in McGee v. International Life Insurance

Co." Also, the record before the court did not disclose

whether the foreign corporation had done any other

business in Illinois.

It was held that the doing of a given volume of business

was not the only way in which a nonresident could establish

the ‘‘minimum contacts’’ with the state sufficient to support

jurisdiction."*

In commenting on the lack of evidence of any previous

volume of business the court said:

. it is a reasonable inference that its commercial

transactions, like those of other manufacturers, result

in substantial use and consumption in this State. To the

18 Supra note 9.

14Tn addition to McGee v. International Life Ins. Co. the court

relied upon Smyth v. Twin State Improvement Corp., 116 Vt. 569,

80 A. 2d 664, 666, 25 A.L.R. 2d 1193 (1951), where employees of a

nonresident corporation engaged in re-roofing a building for a

Vermont resident negligently damaged the building. Service of

process was made on the Secretary of State who forwarded it by

registered mail to the office of the Massachusetts corporation. The

Supreme Court of Vermont held that due process had not been

violated and that continuous activity within the state by the

nonresident corporation was not a prerequisite to jurisdiction.

lla

extent that its business may be directly affected by

transactions occurring here it enjoys benefits from the

laws of this State, and it has undoubtedly benefited,

to a degree, from the protection which-our law has

given to the marketing of hot water heaters containing

its valves. Where the alleged liability arises, as in this

case, from the manufacture of products presumably

sold in contemplation of use here, it should not matter

that the purchase was made from an independent

middleman or that someone other than the defendant

shipped the product into this State.

With the increasing specialization of commercial

activity and the growing interdependence of business

enterprises it is seldom that a manufacturer deals

directly with consumers in other States. The fact that

the benefit he derives from its laws is an indirect one,

however, does not make it-any the less essential to the

conduct of his business; and it is not unreasonable

where a cause of action arises from alleged defects in

his product, to say that the use of such products in the

ordinary course of commerce is sufficient contact with

this State to justify a requirement that he defend

here.”

Although Duriron had no agent in Alaska, to its own

knowledge for a number of years it had been satisfying

practically every order directed to it from the Alaska

market.”

18 Gray v. American Radiator & Standard Sanitary Corp., supra

note 12, at 766.

*° The only known exception would be the refusal to accept the

order mailed to Duriron by Anchorage Natural Gas Corporation

in July of 1962, which was approximately four months after the

explosion which resulted in this suit. As against this refusal, the

record shows that Duriron did accept and fill orders submitted

direct by Anchorage Natural Gas Corporation in April of 1962,

one month following the explosion and again in March of 1963, one

year after the explosion.

12a

When compared with Duriron’s total gross sales of twelve

to seventeen million dollars annually, its known sales of

from four to fifteen thousand dollars annually in Alaska

might be argued not to be a ‘‘substantial volume’”’ of

business. On the other hand, when compared with the total

market demands of a fledgling economy for specialized

industrial products, it is quite likely that Duriron would

be found to have been supplying a substantial portion of

the total needs of the market, if all of the facts were known.

In any event, we agree with Illinois’ conciusion in Gray v.

American Radiator, that the volume of business done in

the state is not the only method by which the necessary

contacts can be established.

In fact, if applied as a fixed test, the dollar volume of

business done in the state as compared with the total dollar

volume of business done in all areas, could result in a given

nonresident corporation being held not to have transacted

a sufficient percentage of its total business in the state

to have established the minimum contacts, whereas another

nonresident corporation with the same dollar volume of

sales in the state but with a smaller total of gross sales

in all areas, might be held to have established the minimum

contacts based on the fact that a greater percentage of its

total sales was transacted in the state.

It is not disputed that the flow of ‘Duriron’s products to

Alaska was continuous from 1958 through 1962, the year

in which this suit was commenced. The flow was not

‘‘systematic’’ in the same sense in. which that term was

used in International Shoe Co. to.describe the efforts of

resident Washington solicitors. Nevertheless, Duriron’s

response to all orders received, whatever the nature of

their origin, seems to have been quite uniform. The orders

were all ‘‘accepted’’ by Duriron” and shipped to Alaska

by Duriron, either directly to the purchaser, or to the

independent contractor-purchaser in care of the ultimate

17 The one exception being that mentioned in note 16 supra.

13a

purchaser, the consumer. Catalogs printed and distributed

by Duriron for the use of and further distribution by manu-

facturer’s representatives such as John T. Doherty &

Associates generated much of Duriron’s Alaska business.

Duriron is presumed to have been aware of this.

Under these facts we hold that Duriron did derive a

benefit from the laws of Alaska which provided a business

climate and market demand for its industria! products and

which were otherwise available to it for any purpose for

which they might be required.

We hold, as did the Supreme Court of Illinois under

similar facts’ that the fact that some of the purchases were

made from independent middlemen or that someone other

than the manufacturer caused the product to be shipped into

the state are not controlling factors.

The dogtrine of ‘‘estimate of the inconveniences”? which

would résult to the foreign corporation from a trial away

from its home has been recognized as one of the tests

relevant in determining whether due process would be

violated by the exercise of local jurisdiction.”

In the case before us the allegedly defective valve manu-

factured by Duriron, was installed in the gas mains of

Anchorage Natural Gas Corporation in Anchorage,

Alaska. The explosion occurred at or very near the place

of the installation. All of the other defendants, which

includes the gas corporation, the contractor, subcontractor

and supervisor are located in Anchorage. Most of the ,wit-

nesses who would testify concerning the allegedly defective

valve and its installation and operation with relation to a

18 Gray v. American Radiator & Standard Sanitary Corp., 22 Il.

2d 432, 176 N.E. 2d 761 (1961).

1® This doctrine was defined and applied by Judge Learned Hand

in Hutchinson v. Chase & Gilbert, Inc., 45 F. 2d 139, 141 (2d Cir.

1930) and approved in International Shoe Co. v. State of Wash-

ington, 326 U.S. 310, 317, 90 L. ed. 95, 102 (1945), as one of the

criteria for determining the question of due process.

14a

claimed lack of certain required couplings are located in

this area. It would appear to be far more convenient to

Duriron to defend the suits in Alaska than to defend in

Ohio and transport all of the witnesses: to that state from

Alaska. The convenience of the plaintiffs is likewise better

served by trial in Alaska for the same reason.

We hold that the nature of the business transacted by

Duriron in Alaska was such that the minimal contacts had

been established. No violation of due process will result

from requiring it to defend these suits,

The order of dismissal entered by the trial court is set

aside and the case remanded for further proceedings con-

sistent with the views expressed in this opinion.

IN THE SUPERIOR COURT OF THR STATR OF ALASKA

THIRD JUDICIAL DISTRICT

Case No. 62-361

Mr. anb Mrs. Norman Bakks, kT AL, Plaintiffs,

Vv.

AncnHoracre Naturat Gas Corporation, ET AL., Defendants.

Order

This day this cause came on to be heard

(i) on the motions of The Duriron Company, Inc. to quash :

(a) the summons and/or process, dated July 25, 1963,

(b) the amended summons and/or process, dated

July 29, 1963,

(c) the supplemental amended summons, dated

December 20, 1963,

15a

(d) the supplemental amended summons, dated

January 29, 1964,

the service and/or attempted service thereof and the

return, if any, heretofore made on said The Duriron

Company, Inc., and

(ii) on the memoranda, the affidavits and exhibits attached

attached thereto, submitted by the parties, and

(iii) on the evidence contained in and exhibits attached as

a part of the depositions of Walter K. Ramage,

Warren Bays, George Milne and Clyde Staup taken,

and filed heretofore, on behalf of the plaintiffs, and

(iv) on the arguments advanced by the parties.

The Court being fully advised in the premises finds:

1. That plaintiffs file an amended complaint and there-

after caused the issuance of summons, on several occasions,

for The Duriron Company, Inc. in attempts to comply with

the provisions of Section 10.05.642 of the Alaska statutes;

2. That The Duriron Company, Ine. is a foreign cor-

poration which is not authorized to transact business in

the State of Alaska and which has not appointed and does

not maintain a registered agent in the State of Alaska;

3. That from the year 1958 to the present time, Independ-

ent Contractors, in the furtherance of their own interests

and from places of business located outside the State of

Alaska, purchased merchandise of The Duriron Company,

Ine., and said Independent Contractors thereafter resold

the merchandise and shipped or caused the merchandise to

be shipped to persons in Alaska;

4. That during the period of five years, 1958 through

1962, three Alaska residents and a facility of the United

States Air Force, based in Alaska, mailed five unsolicited

orders for goods to The Duriron Company, Inc., which

merchandise was furnished by Duriron and represented

l6a

93/10,000ths of 1% of the gross sales of The Duriron Com-

pany, Inc. during said five-year period;

5. That orders for merchandise of The Duriron Com-

pany, Inc., require acceptance outside the State of Alaska

before becoming contracts which are binding on The

Duriron Company, Inc.;

6. That no agent, servant or employee, acting in the

course and scope of employment by The Duriron Company,

Inc., entered the State of Alaska or the territory of Alaska

at any time heretofore, to solicit or consummate the sale of

any products by The Duriron Company, Inc., to any person

in the State of Alaska;

7. That The Duriron Company, Inc. does not transact and

never has transacted any business in the State of Alaska

and service of summons cannot be made on The Duriron

Company, Inc. under Section 10.05.642 of the Alaska

statutes ;

8. That The Duriron Company, Inc. has, at all times,

transacted its business in interstate commerce;

10. That by reason of all of the foregoing, this Court is

not vested with jurisdiction over The Duriron Company,

Ine. ;

11. That by reason of the findings, enumerated above, the

motion of The Duriron Company, Inc. to quash, aforesaid,

should be sustained.

Ir Is, THEREFORE, ORDERED, ADJUDGED AND Decreep that

the motions of The Duriron Company, Inc. to quash the

summons, the amended summons and the supplemental

amended summons, the service and/or attempted service

thereof and the return, if any, shall be, and the same are

hereby, sustained.

By reason of the findings enumerated above, notably that

said The Duriron Company, Inc. does not transact and has

not transacted business in the State of Alaska and that this

17a

Court is not vested with jurisdiction over The Duriron

Company, Inc. and is not vested with jurisdiction to issue

process for said foreign corporation, it is further Ordered

that the above-entitled action, insofar as it asserts claims

against The Duriron Company, Inc., shall be and the same

is hereby dismissed. The Court costs accrued in these pro-

ceedings, as allowed by law, shall be and the same are taxed

against the plaintiffs.

ApproveD: Mar. 17, 1964

s/ Epwarp V. Davis

Judge

Exy, Guess, Rupp & Havetoox

MARSHALL AND SmitH

By P. Eveene Suir

Attorneys for The Buriron

Company, Inc.

Copy REcEIvep py

Ciark & Savace

Attorneys for Plaintiffs

Huaues, THorsness & Lowe

Attorneys for Anchorage

Natural Gas Corporation

Attorney for Delta Engineering

Corporation

Attorney for Cheney Construction

Company and National

Mechanical Contractors