Petition for a Writ of Certiorari — Ratliff v. Cooper Laboratories, Inc.

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Question Presented for Review .............eeeeeeee 2

Constitutional and Statutory Provisions Involved .... 2

NE OE GE ks ce os eae ks hb ek skedioescseuees 3

Reasons for Granting the Writ ...................-. 7

1. The decision herein is not in accord with applicable

decisions of this Court .............ee cece eeeeee 7

2.The Court of Appeals has decided an important

question of federa! law of Nationwide concern

which has not been, but should be, settled by tiris

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I ee ER ey re ar mpm I ey eee. 4 13

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CITATIONS

Pace

Bank of United States v. Deveaux, 9 U. S. (5 Cranch),

pe I nas hah oe a ee na kk So kk 11

Carolina Boat & Plastics Co. v. Glascoat Distributors,

249 S. C. 49, 53, 152 S. E. 2d) 352, 354 (1967) ...... 6

Erie R. R. v. Tompkins, 304 U. S. 64, 74 ........... 11, 12

First National Bank of Chicago v. United Air Lines,

ee SoA dn oo ooo as en khuvsbiesevans 9

Guaranty Trust Co. of New York v. New York, 326

ie I kon hos os kv kan doa ceedecususs 11

Hanna v. Plumer Exts., 380 U. S. 460, 467 (1965) ..11, 12

International Shoe Co. v. State of Washington, 326

ee ry ol eran renee 7, 8, 10

Klaxon v. Steutor Electric Co., Ine, 313 U. S. 487

SEE Wave eet aues ants s cays ete vee ane cia eens 12

Markham v. City of Newport News, 292 F. (2d) 711,

PU a ee ee eek 5, 11

Martin v. Hunter’s Lessee, 14 U. S. (1 Wheat.), 304,

re Eo oe ee ee ia ee ak ee i ot 11

Pennoyer v. Neff, 95 U. S. 714 (1877) ..........cc00. 7

Perkins v. Benquet Consolidated Mining Co., 342 U. S.

PC I ea I i ee AR ee 7, 8, 10

Seymour v. Parke, Davis & Co., 423 F. (2d) 584 (Cal.

ses! ae OE AE AA IR AT Deo Be ane - E : 6, 12

Szantay v. Beech Aircraft Corp., 349 F. (2d) 60, 65

PORN MN si cccuisewouun Coe wanenc aacdéeaws 5, 11, 12

Van Dussen v. Barrack, 376 U. S. 641 (1964) ....... 6, 12

( iii )

OTHER REFERENCES

U. S. Constitution: Pace

BP TRe Fy PIT hod bash oeciecccccccccncvsencse 2

es I io pcb Re an dewcdcscceves 2, 19

aia ani p ib bkad nd deeaees cae wer 3

Amendmeat XIV, Section 1 ........... cece eee 3

28 U.S.C. A.:

a S. r e er ee rere 3, 6, 11

5. re eee 3, 6, 11

OM BIN ons vac nneincteveccs '...8, 6, 11, 12

Vol. 2, Moore’s Federal Practice (2d), Section 425(5),

6 gerry are See Tee ee etme aaa 12

Vol. 4, Wright & Miller, Federal Practice and Proced-

er re errr Terre rr ee reer Tee Pee 8

(iv )

Supreme Court of the United States

OCTOBER TERM, 1970

WS See kos

ANNIE NELL RATLIFF and HENRY RATLIFF,

PETITIONERS, |

Versus

COOPER LABORATORIKS, INC., Respoxpen?

ALICE W. NICHOLS, Petitioner,

versus

STERLING DRUG COMPANY, INC., a CORPORATION,

RESPONDENT

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

FOURTH CIRCUIT

The petitioners pray that a Writ of Certioruri issue to

review the decision and judgment of the United States

Court of appeals for the Fourth Circuit, dated and entered

in these cases on June 29, 1971.

OPINIONS BELOW

The opinions of the District Court (App. 16-26) are

unreported. The opinion of the Court of Appeals (App.

27-33) is not yet reported.

2 RAtTLIFF, et al. PETITICNERS, v. STERLING DruG Co., INC., RESYONDENT

JURISDICTION

The judgment of the Court of Appeals was entered

on June 29, 1971 (App. 27). The jurisdiction of this Court

is invoked under the provisions of 28 U. S. C., Section

1254.

QUESTION PRESENTED FOR REVIEW

May the Court of Appeals reverse, on the ground that

the requirements of federal Due Process have not been satis-

fied, an order of the Distriet Judge upholding jurisdict’on

of the federal court in an tr personam action bronght by a

non-citizen, non-resident plaintiff of the forum state against

a foreign corporation where a citizen or resident plaintiff

of such state would remain jurisdictionally free under the

Due Process clause of the Fifth and Fourteenth Amend-

ments of the United States Constitution to maintain the

identical cause of action against the identical foreign cor-

poration?

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

U.S. Constitution, Article ITI, Section 2.

‘‘The judicial power shall extend to all Cases, in Law

and Equity, * * * to Controversies * * * between Citizens

of different States * * *.”’

U.S. Constitution, Articie IV. Section 1.

‘*Full Faith and Credit shall be given in each State to

the public Acts, Records, and Judicial Proceedings of every

other State * * *.”

U.S. Constitution, Article IV, Section 2.

“The Citizens of each State shall be entitled to all

Privileges and Immunities of Citizens in the several

States.”

RATLIFF, et al. PETITIONERS, v. STERLING DRUG Co., INC., RESPONDENT 3

U. S. Constitution, Amendment IV, Section 1.

‘“ = * * No State shall make or enfo-ce any Law

which shall abridge the privileges or immunities of citizens

of the United States; nor shall any State deprive any per-

son of life, liberty, or property, without due process of

law; nor deny to any person within its jurisdiction the

equal prote ::.n of the laws.”

U.S. Constitution, Amendment V.

‘‘No person * * * shall be deprived of life, liberty, or

property, without due process of law * * *.”

28 U.S. C. A. 1391

**(a) A civil action wherein jurisdiction if founded

only on diversity of citizenship may, except as otherwise

nrovided by law, be brought only in the judicial district

where all plaintiffs or shall defendants reside, or in which

the claim arose.”

* * *

‘“*(e) A corporation may be sued in any judicial dis-

trict in which it is incorporated or licensed to do business

or is doing business, and such judicial district shall be

regarded as the residence of such corporation for service

purposes. ’’

28 U.S. C. 1404

“*(a) For the convenience of parties and witnesses, in

the inierest of justice, a district court may transfer any

civil action to any other district or division where it might

have been brought.’’

STATEMENT OF CASE

The instant cases, two in number, consolidated by the

Court of Appeals on interlocutory appeal from the District

Court, are diversity cases which were brought in scparate

and unconnnected actions against the respordents respec-

tively. :

4 RATLIFF, et al. PETITIONERS, v. STERLING DruG Co., INC., RESPONDENT

In the action against respondent, Cooper Laboratories,

Inc., a Delaware Corporation, the petitioners, residents of

Florida, brought suit in the United States District Court

for the District of South Carolina to recover damages be-

cause of the loss by amputation of both legs of petitioner,

Annie Ratliff, allegedly caused by the consumption in

Florida of drugs manufactured by respondent.

The record shows that the contacts, ties or relations of —

this respondent with the state of South Carolina consist of

regular, systematie and continuous activities which include

solicitation of orders by distribution of literature, promo-

tional material and samples to doctors and customers in

the state, providing and sending into the state labels which

are required under the health laws of the state to be at-

tached to its drug products sold in the state, advertising in

national medical journals having statewide circulation in

South Carolina and listing its products in the Physieian’s

Desk Reference used by doctors in the state, resulting in

sales being made regularly and a continuous flow of its pro-

duets in South Carolina, involving during the vear 1968

and a part of 1969 approximately 293 invoices from which

respondent derived a revenue of approximately $95,000.00,

and also from July 1, 1969, through December 31, 1969,

involving 152 invoices from which it derived a revenue of

approximately $52,000.00. Also, many of its products are

sold on credit and from time to time respondent receives

returns of its products from its customers i: South Caro-

lina.

In the action against respondent, Ster!ing Drug Com-

pany, Ine., a Delaware corporation, the petitioner, Alice

W. Nichols, a resident of Indiana, brought suit in the

United States District Court for the District of South

Carolina to recover damages for partial blindness and

serious injuries to her eyes allegedly caused by the con-

sumption in Indiana of drugs manufactured by respondent.

RATLIFF, et al. PETITIONERS, v. STERLING DRUG Co., INC., RESPONDENT 5

The record shows that this respondent applied and is

licensed to do business in South Carolina and has appointed

an agent for service of process in South Carolina. Its con-

tacts, ties or relations with South Carolina consist of regu-

lar, systematic and continuous activities which include

sclicitation of orders through five of its emplovees who live

and work throughout the state, resulting in sales heing

made regularly in South Carolina and a continuous flow

of its products into the state, from which it derives sub-

stantial revenue.

On the basis of the foregoing facts, the District Judge,

in each case, overruled respondent’s challenge to the juris-

diction and held that respondent is doing business in South

Carolina and therefore amenable to the Jurisdiction of the

court.

In reaching his conclusion in each case. the District

Judge rejected respondent’s contention that the non-resi-

dency of petitioner required the granting of the motion

to dismiss for lack of jurisdiction. He reasoned that to

uphold respondent’s contention would result in diserimina-

tion against non-residents and would thus defeat the most

fundamental purpose of the grant of diversity jurisdiction

which is to avoid discrimination against non-residents, cit-

ing in support of his reasoning the opinion of Judge Hayns-

worth in Markham v. City of Newport News, 292 F (2d)

“18 (CA4, 1961) and the opinion of Judge Sobeloff in

Szantay v. Beech Aircraft Corp., 349 F. (2d) 60 (CA4,

1964).

The District Judge also rejected the contention of the

respondent in each case that the motion should be granted

because it would make available to petitioners the six year

statute of limitations—the limitation period having run in

all other states having any connection with the claim. In

"SO rejecting respondent’s contention, the District Judge

reasoned that petitioner has the rigkt to select her forum,

6 RaTuirr, et al. PETITIONERS, 7. STERLING DruG Co., INC., RESPONDENT

as permitted by 28 U.S. C. 1391 (a) and (b), and, having

selected South Carolina as the forum for bringing this ac-

tion, is entitled to retain whatever advantages may flow

from the state laws of the forum initiaily selected, including

its conflict of laws rule that the 6 year Statute of Limitations

of South Carolina governs, even though the case may be

transferred to another forum for convenience of witnesses

under 28 U.S. C. A. 1404 (a), citing Van Dusen v. Barrack,

376 U.S. 641 (1964).

Upon appeai, the Court of Appeals, notwithstanding

that under South Carolina law the issue of jurisdiction is

one of fact which should be affirmed on appeal unless un-

supported by evidence, Carolina Boat @ Plastics Co. v.

Glascoat Distributors, Inc., 249 S. C. 49, 152 S. E. (2d)

352 (1967), reached a factual finding that the District Court

was without jurisdiction, stating that the contacts, ties or

relations of the respondents with South Carolina are in-

sufficient to satisfy the due process clause of the Four-

teenth Amendment, and therefore reversed the District

Judge. The Court of Appeals reasoned that since neither re-

spondent ‘‘ maintains an office in South Carolina”, nor ‘‘ ware-

houses goods in the state,” the activities of the respondent

corporation, ‘‘although possibly sufficient to constitute

‘presence,’ are nonetheless minimal,” notwithstanding the

evidence of record that their “contacts, ties or relations”

with the state are regular, systematic and continuous.

The Court did not stop there, however. It concluded,

by subscribing to the position taken by the First Circuit in

Seymour v. Parke, Davis é Co., 423 F. (2d) 584 (1970), that,

under the identical facts herein, ‘‘If the plaintiff has some

attachment to the forum, (i.e, a résident or citizen of the

state) or if the defendant has adopted the state as one of its

major places of business, we would have no question of the

right of the state to subject the defendant to suit for uncon-

nected causes of action.’’ (parenthesis added.) Yet no-

————————

RATLIFF, et al. PETITIONERS, v. STERLING DruG Co., INC., RESPONDENT 7

where in its otherwise detailed opinion, in which the Court

below stated that its ‘‘inquiry is limited to a determination

of whether the facts in the instant case fall within the no-

tions of due process’’, is there any discussion as to why

identical business activities of the corporate respondents

are sufficiently extensive to satisfy due process in actions

where a plaintiff is a resident or citizen and only minimal

and not sufficiently extensive to satisfy the Due Process re-

quirements in identical actions where the plaintiff is a non-

resident, non-citizen of the forum state. Neither is there any

discussion of the propriety for differentiating between a

resident or citizen plaintiff and a non-resident, non-citizen

plaintiff, nor any rational basis for such differentiation and

application of different standards as to each, in determin-

ing federal Due Process requirements.

REASONS FOR GRANTING THE WRIT

1. The decision herein is not in accord with applicable

decisions of this Court: The decision in the Court below is

in direct conflict with the holdings by this Court in Inter-

national Shoe Co. v. State of Washington, 326 U. S. 310

(1945) and Perkms v. Benquet Consolidated Mining Co.,

342 U. S. 437 (1952) that federal due process does not

preclude a federal court in a state from exercising juris-

diction over a foreign corporation in an in personam action

brought against it by a non-resident plaintiff on a transi-

tory cause of action which did not arise in tne state, where

the contacts, ties or relations of the foreign corporation

in the state are continuous, regular and systematic.

Under the older standard and more limited notion of

amenability as prescribed by Pennoyer v. Neff, 95 U. S.

714 (1877) “presence” of a foreign corporation within the

state so as to subject it to the jurisdiction of the courts

of such state required more than that the corporatior have

“minimal’’ contacts with the state. This older and limited

8 RATLIFF, et al. PETITIONERS, v. STERLING DRUG Co., INC., RESPONDENT

notion of amenability has now been expanded by the deci-

sion of this Court in International Shoe, regardless of

whether a plaintiff is or is not a resident or citizen of the

state, to the extent that jurisdiction may be exercised by

the courts in a state over a foreign corporation in causes of

action whicl: arise in the state where the corporation has

minimal contacts with the state, even though it is not phy-

sically } ~esent in the state and has no property, office or

agent in the state; and by the decision in Perkins v. Ben-

quet, jarisdiction over a foreign corporation whose con-

tacts, ties or relations with the state are substantial, Le.,

continuous, regular and systematic, may be exercised by

the courts in such state, even though the cause of action

does not arise in the state and the aetien is brought by a

plaintiff who is neither a resident nor citizen of the state.

In other words, as more clearly stated in Volume 4,

Wright & Miller, Federal Practice and Procedure, at page

261, “When the claim is based upon an act committed out-

side the state that has no consequences within the state,

the propriety of asserting jurisdiction depends upon whe-

ther the corporation has carried on continuous and syste-

matic, although unrelated, activities in the state. If this

proves to be the case, it is consonant with fair play and

justice to require the corporation to defend the suit,” citing

Perkins v. Benquet, supra.

The rationale of the foregoing decisions of this Court

applies with equal force to the instant cases which present

the same important question. The action of the District

Judge in upholding jurisdiction over the corporate respond-

ents was based not upon a “casual”, “single” or “isolated”

contact, but upon contacts of the corporations which are

substantial, systematic, regular and continuous. “They re-

sulted in a large volume of interstate business, in the

course of which appellant (respondents here) received the

benefits and protection of the laws of the state, including

-——-

RATLIFF, et al. PETITIONERS, v. STERLING DRUG Co., INC., RESPONDENT 9

the right to resort to the courts for the enforcement of its

rights.” Mcreover, even though a “rational nexus” between

the forum state and the cause of action is not a requirement

of due process where the ‘‘ties, contacts or relations” of the

foreign corporation with the state are substantial, regular,

continuous and systematic, as the record discloses in the in-

stant cases, there is a “rational nexus” between South Caro-

lina and the causes of action here. The causes of action,

although not arising in South Carolina, arose out of activi-

ties of the corporations identical to its activities in South

Carolina—the solicitation and promotion of orders result-

ing in the flow of its drug products in South Carolina. Thus,

South Carolina has a mosi important interest in the instant

litigation, such as this, which tends to operate as a deter-

rent, not only to respondents but to all others as well to

prevent the flow of products in the state which are danger-

ous to the public health, safety and welfare of its citizens.

Also, the holding by the Court of Appeals that out-of-

state causes of action against the identical foreign corpora-

tion brought by plaintiffs who are neither residents nor citi-

rT OF SOT CHTOLAA DAY Hot he maintained because it

Violates due process, where il brought by residents or citi-

zens may be maintained without violating due process, is in

direct conflict with the holding by this Court in First Na-

tional Bank of Chicago v. United Airlines, 342 U.S. 396

(1952) that where some out-of-state causes of action may

be tried in a state there is no reason for refusal to permit

others to be tried, and the refusal to do so constitutes a vio-

lation of the Full Faith and Credit Clause of the United

States Constitution (Article IV, section 1): and. as applied

to citizens of sister states, the holding of the Court of Ap-

peals violates the Privileges and humunities clause of the

United States Constitution (Article IV, section 2).

The allowance of the petition in this case would afford

the Court the opportunity te review and resolve the prob-

10 RaTLiFF, e¢ al. PETITICNERS, v. STERLING DruG Co., INC., RESPONDENT

lems involved herein on an important jurisdictional due

process question of federal law and appellate review, and

would be conducive to the fair and uniform administration

of justice.

2. The Court of Appeals has decided an important

question of federal law of nationwide concern which has

not been, but should be, settled by this Court: This Court,

in its decision of Jnternutional Shoe, supra, and Perkins

v. Benquet, supra, expanding the older concepts of amen-

ability of foreign corporations to suits in a state with

which they have contacts, looked only to the degree of activi-

ties and contacts of the corporate defendants in determin-

ing whether due process was satisfied; and did not consider

as a factor the residency or citizenship of the plaintiffs.

The Court below, however, in reversing the order of the

District Judge departed from the test laid down by this

Court in determining due process, and applied a new and

different test in reaching its decision. It made a distinction

between plaintiffs who are residents or citizens of the

forum state and those who are neither residents nor citizens,

on identical causes of actions against identical foreign

corporations. It placed substantial reliance upon ‘‘the lack

of attachment” of the petitioners to the forum, such as resi-

dency or citizenship in holding that the maintenance of the

actions would violate due process. It did not state that due

process would be violated by the maintenance of actions

against foreign corporations by all plaintiffs. Rather, it

would violate due process only if brought by plaintiffs who

have no attachment to the forum, either as residents or citi-

zens and that a resident or citizen. of the state would be free

to maintain the identical actions brought here without vio-

lating due process, and thus placed an uneven hand on

plaintiffs who are neither residents nor citizens of the

RATLIFF, et al. PETITIONERS, v. STERLING DRUG Co., INC., RESPONDENT 11

forum state as compared to those who are residents or

citizens of such state.”

The true effect of the holding by the Court below would

be to defeat the fundamental purpose for the grant of

diversity jurisdiction under Article III, Section 2 of the

United States Constitution to avoid discrimination against

non-residents and would be in direct conflict with the fed-

eral principle that a non-resident resorting to the federal

diversity jurisdiction should be accorded the same rights

that a resident litigant would receive.

Hana v. Plumer Extr., 380 U. S. 460, 467 (1965) ;

Guaranty Trust Co. of New York v. New York,

326 U. S. 99, 111 (1945);

Erie R. R. v. Tompkins, 304 U. S. 64, 74 (1938) ;

Martin v. Hunter’s Lessee, 14 U. S. (1 Wheat,)

304, 347 (1816);

Bank of United States v. Deveaux, 9 U. 8. (5

Cranch) 61, 87 (1809) ;

Szantay v. Beech Aircraft Corp., 349 F. (2d) 60, 65

(C. A. 4, 1964;

Markham v. City of Newport News, 292 F. (2d)

711, 718 (C. A. 4, 1961).

Also, the Court below, in reversing the District J udge,

points out in its opinion as a factor for its decision that

plaintiffs selected South Carolina as the forum “for the

sole purpose of availing themselves of the relatively long

statute of limitations—the limitation periods having run

in all other states having any connection with the claims

presented.’ To permit the decision of the Court below to

stand because of this factor would operate to deprive a

plaintiff of the substantial right to select a forum granted

under the provisions of 28 U.S. C. A., section 1391 (a) and

\¢) and retain the state law advantages of the forum in

which such plaintiff witially brings the action, subject to

transfer under 28 U.S. C. A., section 1404(a), and would

- thus be-in violation of the principles enunciated by this

12 RATLIFF, et al. PETITIONERS, v. STERLING DruG Co., INc., RESPONDENT

Court in Van Dusen v. Barrack, 376 U. S. 641 (1964). It

would also operate to permit a federal court to refuse te

apply the law of the state in which it is sitting, including

its conflict of law rules, in direct violation of the mandate

of Frie RR. v. Tompkins, supra, and Klaxon v. Stentor

Electric Co., Inc., 313 U.S. 487 (1941) that a federal court

is bound to apply the law of the state in which it sits, which

includes its conflict of law rules.

Nor can the factor of “relative convenience” serve as

a basis for dismissal of the actions »ecause this factor is no

longer of overriding importance since the passage by Con-

gress of 28 U.S. C. A 1404(a) providing for the transfer

of cases for convenience of witnesses, in the interest of

justice, 2 Moore’s Federal Practice (2d), Section 4.25(5)

p. 1172, particularly where the activity within the state is

regular, continuous and systematic, sueh as is the factual

sitaation here.

The decision .f the Court below aad that of the First

Cireuit in Seymour v. Parke, Davis & Co., 423 F. (2d) 584

(1970) upon which the Court below relied, are not only in

direct conflict with well established prineipies of federal

law as enunciated in Erie, Byrd, Tanna, Van Dusen, Klavon

and Szantay, but clearly violate the right of petitioners,

who are neither residents nor citizens of the formu state,

under the Privileges and Tinunities, Due Process and

Equal Pretection clauses, to select the forum to bring their

actions for the redress of wrongs committed by the corpor-

ate respondents, where plaintiffs who are residents or citi-

zens of the forum state would be free to select the identical

forum to bring the identical actions. Certainly, when the

corporate respondents undertook to carry on its activities

in South Carolina, they: did so with the knowledge that

they would be subject to the jurisdiction of the Courts in

South Carolina, ineluding its laws, and, therefore, should

not now be permitted to eseape its jurisdiction because

RATLIFF, et al. PETITIONERS, v. STERLING DRUG Co., INC., RESPONDENT 13

the plaintiffs are non-residents and non-citizens of South

Carolina or because South Carolina has a longer Statute

of Limitations than the other states where the defendants

might be doing business and the actions might also have

been brought.

The issue raised under this heading involves an impor-

tant federal jurisdictional due process question of nation-

wide concern decided by the Court of Appeals which has

not been, but should be, settled by this Court.

CONCLUSION

For the foregoing reasons, this Court should grant the

petition for a Writ of Certiorari, should reverse the judg-

ment of the Court below and should affirm the order of the

District Jadge that the respondents are amenable to juris-

diction in South Carolina.

Respectfully submitted,

HENRY HAMMER,

ISADORE S. BERNSTEIN,

HOWARD HAMMER,

Attorneys for Petitioners.

i

INDEX TO APPENDIX

PAGE

Decision of District Court (Ratliff et al. v. Cooper

je) RR ne rea en Oey Ne ere eee Ter 17

Decision of District Court (Nicholas v. Sterling Drug) 22

Lar di

Dectsse OF Comrt Gl AMON 6.nisc cievcccesssasscses 27

(16)

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF SOUTH CAROLINA

Co_tumB1A Division

Civil Action No. 69-446

ANNIE MELL RATLIFF axp HENRY RATLIFF,

PLAINTIFFs,

versus

COOPER LABORATORIES, INC., DeFrenpant

ORDER

This action was brought by plaintiff who is a citizen

and resident of the state of Florida, and the cause of action

arose in that state. The defendant is a Delaware corpora-

tion whose business in South Carolina involves the solicita-

tior and promotion of sales and distribution of its products

in the state. South Carolina has had no contact with the

subject matter of this action.

At the time this action was commenced, each count

of the action would have been barred by the Statute of

Limitations of the state where the causes of action arose.

This action would not be barred under the South Carolina

Statute of Limitations, however, if that statute is applic-

able.

Defendant has moved to set aside service and dismiss

the complairt on several grounds. The first is that this

Court lacks jurisdiction because the defendant is not li-

censed to do business and is not doing business in the state

of South Carolina; and second, that this Court lacks juris-

diction because of South Carolina’s “door closing” statute,

Section 10-214, South Carolina Code of Laws, 1962. It is

also asserted that the venue is improper, that the Statute

of Limitations of the place where the eause of action arose

would be applicable, and would constitute a bar to the

action, and the application of the South Carolina Statute

of Limitations would be unconstitutional.

Section 10-214, Code of Laws of South Carolina, 1962.

provides that:

(17)

18 RATLIFF, et al. PETITIONERS, v. STERLING DrvG Co., INC., RESPONDENT

“An action against a corporation created by or

under the laws of any other state, government or coun-

try may be brought in the cireuit court: (1) by any

resident of this state for any cause of action; or (2)

By a plaintiff not a resident of this state when the

cause of action shall have arisen or the subject of the

action shall be situated within this state.”

Under this statute, the South Carolina state courts do

not have jurisdiction in an action brought by a non-resident

against a foreign corporation in a foreign cause of action.

The question is whether the South Carolina statute should

be applied so as to restrict jurisdiction of the federal courts

in South Carolina in diversity cases.

In Szantay v. S. Beech Aircraft Corp., 349 F. (2d) 60

(C. A. 4, 1964), the Court in discussing the “Erie-Guaranty

Trust-Byrd” Doctrine applied the following analysis in

resolving a federal-state conflict in a diversity case:

“1. If the state provision, whether legislatively

adopted or judicially declared, is the substantive right

or obligation at issue, it is constitutionally controlling.

“2. If the state provision is a procedure intimately

bound up with the state right or obligation, it is like-

wise constitutionally controlling.

“3. If the state procedural provision is not inti-

mately bound up with the right being enforced but its

application would substantially affect the outcome of

the litigation, the federal diversity court must still

apply it. unless there are affirmative countervailing

federal considerations. This is not deemed a constitu-

tional requirement but one dictated by comity.”

The South Carolina “door closing” statute is procedural

and its application would substantially affect the outcome

of the litigation in the instant case. The question for deter-

mination, therefore, is whether there are affirmative coun-

tervailing considerations which would prevent this Court

from applying the statute in this diversity case. The Court

determines that there are suck: affirmative countervailing

considerations, and the statute is therefore inapplicable.

APPENDIX 19

The application of the statute would result in discrimi-

nation against non-residents. Had the plaintiff in this case

been a resident of South Carolina she could have sued in

the state courts. The plaintiff, however, being a non-resi-

dent, is prohibited by statute from suing in the state courts.

In discussing countervailing federal considerations in Szan-

tay, Supra, at page 65, the Court stated:

“The most fundamental is that expressed in the

constitutional extension of subject matter jurisdiction

to the federal courts in suits between citizens of differ-

ent states. U.S. Const. Art. III, Section 2. The purpose

of this jurisdictional grant was to avoid discrimina-

tion against non-residents . . . The South Carolina

‘door closing’ statute permits its residents to sue for-

eign corporations on foreign causes of action vet denies

this privilege to non-residents.’’

The Court quotes Judge Haynsworth in Markham v.

City of Newport News, 292 F. (2d) 711, 718 (C. A. 4, 1961) :

“(al non-resident litigant in resorting to the fed-

eral diversity jurisdiction should obtain the same relief ~

a resident litigant would receive in the state courts.”

Defendant asserts that to grant jurisdiction in the in-

stant case would permit forum shopping. The federal policy

against forum shopping as set forth in Erie v. Tompkins,

304 U.S. 64, 585 Ct. 817, 82 L. Ed. 1188 (1938), however,

applies to forum shopping as between federal and state

courts sitting in the same state, and not as between federal

ge sitting in different states. As stated in Van Dusen

. Barrack, 376 U.S. 612, 84 S. Ct. 805 (1964) :

“Of course these cases allow plaintiffs to retain

whatever advantages may flow from the state laws of

the forum they have initially selected. There is noth-

ing, however, in the language or policy of Sec. 1040(a)

to justify its use by defendants to defeat the advan-

tages accruing to plaintiffs who have chosen a forum

which, although it was inconvenient, was a proper

venue. In this regard the transfer provisions of Sec.

1404(a) may be compared with those of Sec. 1406(a).

Although both sections were broadly designed to allow

20 RATLIFF, et al. PETITIONERS, v. STERLING DruG Co., INC., RESPONDENT

transfer instead of dismissal, See. 1406(a) provides

for transfer from forums in which venue is wrongly or

improperly laid, whereas, in contrast, See. 1404(a)

operates on the premises that the plaintiff has prop-

erly exercised his venue privileges. This distinction

underlines the fact that Congress, in passing See.

1404(a), was primarily concerned with the problems

arising where, despite the propriety of the plaintiff’s

venue selection, the chosen forum was an inconvenient

one.

“In considering the Judicial Code, Congress was

particularly aware of the need for provisions to miti-

gate abuses stemming from broad federal venue provi-

sions. The venue provision of the Federal Employer’s

Liability Act was the subject of special concern. How-

ever, while the Judicial Code was pending, Congress

considered and rejected the Jennings bill which, as the

Court stated in E.r Parte Collett, 337 U. S. 55, 64, 69

Ss. Ct. 944, 949, 93 L. ld. 1207, was far more drastic

than Section 1404(a), and ‘would in large part have

repealed (the venue section) ef the Liability Act’ by

severely delimiting the permissable forums. This legis-

lative background supports the view that See. 1404(a)

was not designed to narrow the plaintiff’s venue privi-

lege or to defeat the state-law advantages that might

accrue ‘from the exercise of this venue privilege but

rather the provision was simply to counteract the in-

convenience that flowed from the venue statutes by

permitting transfer to a convenient federal court.”

As pointed out in Szantay, supra, this case is not con-

trolled by Angel v. Bullington, 330 U. S. 183, 67 S. Ct. 657,

91 L. Ed. 832 (1947); Woods v. Interstate Realty Co., 337

U. S. 535, 69 S. Ct. 1239, 93 L. Ed. 1524 (1949). Neither of

these cases involve discrimination against non-residents.

In the absence of South Carolina’s “door closing”

statute, there is no question but that the federal court

would have jurisdiction in South Carolina. The Court has

determined that the statute is not applicable, and venue is

proper. Papciak v. Richardson-Merrill, Inc., C/S No. 67-219,

interlocutory appeal: denied. (1968) and petition for re-

APPENDIX 21

hearing denied, United States Court of Appeals for the

Fourth Circuit Mise. No. 500 (1968). At the hearing of the

motions, defendant indicated that it may desire to move

for a change of venue for the convenience of parties and

witnesses, and in the interest of Justice; and the Court will

grant such a motion pursuant to the provisions of 28 USCA

1404(a), if made, within ten (10) days from the entry of

this Order.

Having selected South Carolina as the forum for bring-

ing the action, plaintiff is entitled to whatever benefits may

flow from the laws of this state. Under South Carolina law,

the law of the forum governs the statute of limitations to

he applied. Accordingly, in changing the venue, the South

Carolina Statute of Limitations should apply. Van Dusen

v. Barrack, supra.

IT IS ORDERED that defendant’s motions to set aside

service of summons and to dismiss the complaint are de-

nied; however, the Court is of the opinion that this Order

involves a controlling question of law as to which there is

substantial ground for difference of opinion and that an

immediate appeal from the Order may materially advance

the ultimate termination of the litigation, therefore, an

interlocutory appeal pursuant to 28 USCA § 1292(b) may

be taken from this Order, if application is made within ten

(10) days after entry of this Order: and said application

shall stay the proceedings in this Court if made; and

IT IS FURTHER ORDERED that should the defend-

ant renew its motion to change the venue within ten (10)

days from entry of this Order. the venue may be changed

to a more convenient forum subject to the application of

the South Carolina Statute of Limitations.

ROBERT MARTIN, JR..

United States District Judge.

Coluinbia, S.C.

April 14, 1970

22 RATLIFF, et al. PETITIONERS, v. STERLING DruG Co., INC., RESPUNDENT

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF SOUTH CAROLINA

CoLtumb1A Division

Civil Action No. 69-1048

ALICE W. NICHOLS, PuiarntiFr,

versus

STERLING DRUG COMPANY, INC., a Corporation,

DEFENDANT

ORDER

This action was brought by plaintiff, a citizen and

resident of the state of Indiana, and the cause of action

arose without this state. The defendant is a Delaware cor-

poration authorized to do business in South Carolina and

is engaged in the business of soliciting and selling drugs

and medicines in South Carolina; and has designated an

agent for servi: of process in this state. South Carolina

has had no contact with the subject matter of this action.

At the time this action was commenced, each count

of the action would have been barred by the Statute of

Limitations of the state where the cause of action arose.

The action would not be barred under the South Carolina

Statute of limitations, however, if that statute is applicable.

The defendant has moved to set aside service and dis-

miss the complaint on several grounds. The first is that this

Court lacks jurisdiction because there are no local interests

involved in this action, and to subject the defendant to this

suit would violate the due process clause to the Fourteenth

Amendment of the United States Constitution; second, that

the laws of South Carolina would not allow a non-resider t

plaintiff to sue a foreign corporation in South Carolina on

a foreign cause of action under the “door closing” statute

of South Carolina, Section 10-214, South Carolina Code

of Laws, 1962. It is also asserted that the law of the place

where the cause of action:arose would be applicable and

would constitute a bar to this action, and the application

of the South Carolina Statute of Limitations would be

unconstitutional.

SS ee ek Ae EO

APPENDIX 23

Defendant is authorized to do and is doing business in

South Carolina and is therefore amenable to the jurisdiction

of this Court unless Section 10-214, Code of Laws of South

Carolina, 1962, is applicable. This section provides that:

“An action against a corporation created by or

under the laws of any other state, government or coun-

try may be brought in the circuit court, (1) By any

resident of this State for any cause of action; or (2)

By a plaintiff not a resident of this State when the

cause of action shall have arisen or the subject of the

action shall be situated within this State.’’

Thus, the South Carolina State Courts do not have

jurisdiction over a suit brought by a non-resident against

a fcreign corporation on a foreign cause of action. The

question is whether the South Carolina Statute should be

applied so as to restrict the jurisdiction of the federal

courts in South Carolina in diversity cases.

In Szantuy v. S. Beech Aircraft Corp., 349 F. (2d) 60

(C. A. 4, 1964), the Court in discussing the “Erie-Gvaranty

Trust-Byrd” Doctrine applied the following analysis in

resolving a federal-state conflict in a diversity case:

“1. If the state provision, whether legislatively

adopted or judicially declared, is the substantive right

or ovligation at issue, it is constitutionally controlling.

“2. If the state provision is a procedure intimately

bound up with the state right or obligation, it is like-

wise constitutionally controlling.

“3. If the state procedural provision is not inti-

mately bound up with the right being enforced but its

application would substantially affect the outcome of

the litigation, the federal diversity court must still

apply it unless there are affirmative countervailing

federal considerations. This is not deemed a constitu-

tional requirement but one dictated by comity.”

The South Carolina “door closing” statute is proced-

ural and its application would substantially affect the out-

come of the litigation in the instant case. The question for

determination, therefore, is whether there are affirmative

countervailing considerations which would prevent this

24 RATLIFF, et al. PETITIONERS, v. STERLING DruG Co., INC., RESPONDENT

Court from applying the statute in this diversity case. The

Court determines that there are such affirmative counter-

vailing considerations and that the statute is therefore

inapplicable.

The application of the statute would result in discrimi-

nation against non-residents. Had the plaintiff in this case

been a resident of South Carolina, she could have sued in

the state courts. The plaintiff, however, being a non-resi-

dent. is prohibited by statute from suing in the state courts.

Tn discussing countervailing federal considerations in Szan-

fay supra, at page 65, the Court stated:

“The most fundamental is that expressed in the

constitutional extension of subject matter jurisdiction

to the federal courts in suits between citizens of differ-

ent states. U. S. Const. Art. Ili, See. 2. The purpose

of this jurisdictional grant was to avoia discrimination

against non-residents ... The South Carolina “door

closing” statute permits its residents to sue foreign

corporations on foreign causes of action vet denies this

privilege to non-residents.”

The Court quotes Judge Haynsworth in Jlarkhaia v.

City of Newport News, 292 F. (2d) 711, 718 (C. A. 4, 1961):

“lal non-resident litigant in resorting to the fed-

eral diversity jurisdiction should obtain the same relief

a resident litigant would receive in the state courts.”

Defendant asserts that to grant jurisdiction in the in-

stant case would permit forum shopping. The federal policy

against forum shopping as set forth in Erie vr. Tompkins,

304 UL S. 64, 585 Ct. 817, S82 L. Fed. 1188 (1988), however,

applies to fortuin shopping as between a federal and state

court sitting in the same state, and not as between federal

courts sitting in different states. As stated in Van Dusen

r, Barrack, 3576 U.S. 612, 84S. Ct. S05 (1964) :

“Of course these cases allow plaintiffs to retain

whatever advantages may flow from the siate laws of

the forum they have initially selected. There is noth-

ing, however, in the language or policy of See. 1404(a)

to justify its use by defendants to defeat the advan-

tages accruing to plaintiffs who have chosen a forum

APPENDIX 25

which, although it was inconvenient, was a proper

venue. In this regard the transfer provisions of See.

1404(a) may be compared with those of Sec. 1406(a).

Although both sections were broadly designed to allow *

transfer instead of dismissal, Sec. 1406(a) provides

for transfer from forums in which venue is wrongly

or improperly laid, whereas, in contrast, Sec. 1404(a)

operates on the premises that the plaintiff has prop-

erly exercised his vent privilege. This distinction

underlines the fact that Congress, in passing Sec.

1404(a), was primarily concerned with the problems

arising where, despite the properiety of the plaintiff’s

venue seiection, the chosen forum was an inconvenient

one. |

“In considering the Judicial Code, Congress was

particularly aware of the need for provisions to miti-

gate abuses stemming from broad federal venue provi-

sions. The venue provision of the Federal Emplover’s

Liability Act was the subject of special concern. How-

ever, while the Judicial Code was pending, Congress

considered and rejected the Jennings bill which, as the

Court stated in Ex Parte Collett, 337 U. S. 55, 64; 69

S. Ct. 944, 949: 93 L. Ed. 1207, was far more drastic

than Sec. 1404(a), and ‘would in large part have re-

pealed (the venue section) of the Liability Act’ by

severely delimiting the permissable forums. This legis-

lative background supports the view that Sec. 1404(a)

was not designed to narrow the plaintiff’s venue pri-

vilege or to defeat the State-law advantages that migat

accrue from the exercise of this venue privilege but

rather the provision was simply to counteract the in-

conviences that fowed from the venue statutes by per-

mitting transfer to a convenient federal court.”

As pointed out in Szantay, supra, this case is not con-

trolled by Angel v. Bullington, 330 U. S. 183, 67 S. Ct. 637,

91 L. Ed. 832 (1947); Woods v. Interstaie Realty Co., 337

U. S. 535, 69 S. Ct. 1239, 93 L. Ed. 1524 (1949). Neither of

these cases involve discrimination against non-residents.

In the absence of South Caroslina’s “door closing”

statute, there is no question but that the federal court

26 RATLIFF, et al. PETITIONERS, v. STERLING DrucG Co., INC., RESPONDENT

would have jurisdiction in South Carolina. The Court has

determined that the statute i: not applicable and vense is

proper. Papciak v. Richardson-Merrill, Inc., C/A Ne. §7-219,

interlocutory appeal denied (1968), and ‘petition fer re-

hearing denied, United States Court of Appeals for the

Fourth Circuit, Mise. No. 500 (1968). At the hearing of the

motions, defendant indicated that it may desire to move

for a change of venue for the convenience of parties and

witnesses, and in the interests of justice; and the court will

grant such a motion pursuant to the provisions of 28 USCA

1404(a), if made, within ten (10) days from entry of this

Order.

Having selected South Carolina as the forum for bring-

ing this action, plaintiff is entitled to whatever benefits may

flow from the laws of this state. Under South Carolina law,

the law of the forum governs the statute of limitations to

be applied. Accordingly, if the venue should be changed to

the state where the cause of action arose, the South Caro-

lina Statute of Limitations should apply. Van Dusen v.

Barrack, supra.

IT IS ORDERED that defendant’s motions to quash

the service of suminons and to dismiss the action be and the

same is hereby denied; however, the Court is of the opinion

that this Order involves a controlling question of law as to

which there is substantial ground for difference of opinion

an? that an immediate appeal from the Order may ma-

terially advance the ultimate termination of the litigation,

therefore, an interlocutory appeal pursuant to 28 USCA

§ 1292(b) may be taken from this Order, if application is

made to it within ten (10) days after entry of this Order;

and said application shall stay the proceedings in this

Court if made; and

IT IS FURTHER ORDERED that should the defend-

ant move for a change of venue within ten (10) days from

entry of this Order, the venue may be changed to a more

convenient forum, subject to the application of the South

Carolina Statute of Limitations.

J. ROBERT MARTIN, JR.,

Columbia, S. C. United States District Judge.

April 21, 1970

0 en NO IE ANA Ae ANNA gre S20!

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APPENDIX 27

United States Court of Appeals

FOURTH CIRCUIT

No. 14,788

ANNIE NELL RATLIFF and HENRY RATLIFF,

APPELLEES,

versus |

COOPER LABORATORIES, INC., AppeLLant

No. 14,789

ALICE W. NICHOLS, Appe.tes,

versus

STERLING DRUG COMPANY, a corporation, APPELLANT

APPEALS FROM THE Unitep States District Court FOR THE

District oF SoutH Carourna, at CoLumsta. J. Rosert

Martin, JR., District JUDGE

(Argued February 4, 1971. Decided June 29, 1971.)

Before WINTER and CRAVEN, Circuit Judges, and

MILLER, District Judge

Julius W. McKay and EK. W. Laney, III (McKay, McKay,

Sherrill, Walker, and Wilkins; and Turner, Padget, Graham

and Laney on brief), for Appellant in No. 14,788 and 14,789,

and Henry Hammer for Appellees in No. 14,788 and 14,789.

AAS AS AE CA Cote aE IRS I 0

28 NRA ORT ca tre ite ape,

PS adeand F

RA ee Fee

PARA es 1h ER ile GP abe af 4 MRS Stee

28 RATLIFF, et al. PETITIONERS, v. STERLING DruG Co., INC., RESPONDENT

CRAVEN, Cireuit Judge:

This is a consolidated interlocutory appeal, 29 U.S. C.

§ 1292(b), by two drug manufacturing companies, Cooper

Laboratories, Ine. and Sterling Drug Company, Inc., who

challenge the jurisdiction of the District Court of South

Carolina to adjudicate certain claims brought by nonresi-

dents and arising outside the state. The district court denied

the motions of the deiendant drug companies to set aside

the service of summons and te dismiss the complaint. We

think the facts presented as a basis for in personam juris-

diction are insufficient “contacts, ties, or relations’’* to

satisfy the due process clause of the Fourteenth Amend-

ment, and therefore reverse.

These are diversity jurisdiction cases with the requi-

site jurisdictional amount. Both claims stem from alleged

injuries suffered from the consumption of drugs manu-

factured by defendants. The drugs were neither manufac-

tured nor consumed in South Carolina.

Plaintiffs Annie and Henry Ratliff are citizens and

residents of Florida. She purchased the allegedly harmful

drugs in Florida and apparently consumed them there, but,

in any event, did not use them in South Carolina. Defendant

Cooper Laboratories, the maker of the drug used by Mrs.

Ratliff. is a Delaware corporation with its priacipal place

of Susiness in Mystic, Connecticut. Its activities in South

Carolina are limited to solicitation by mail to dealers and

wholesalers, and the mailing of promotional literature to

approximately 650 doctors on its mailing lists. q

Plaintiff Alice W. Nichols is a citizen and resident of

Indiana, and it has been stipulated that “the drugs referred

to in the Complaint were purchased, consumed and ingested

in Indiana and the injuries and damages complained of

occurred in Indiana” and that “the treatment and hospitali-

zation referred to in the Complaint occurred in Indiana.”

Defendant Sterling Drug. a Delaware corporation, main-

tains its principal place of business in New York where it

manufactured the drug taken by plaintiff Nichols. Sterling

Drug’s activities in South Carolina, however, are more

t International Shoe Co. v. Washington, 326 U. S. 310, 319 (1945).

APPENDIX 29

extensive than those of Cooper Laboratories. It has filed

application and been given authority to do business in

South Carolina and has appointed an agent for service of

process. South Carolina Code of Laws 12-23.1 through 12-

23.16. Additionally, Sterling maintains five “detail men’’

who live in South Carolina and promote Sterling’s products

through personal contacts with doctors and drugstores

throughout the state. Although occasionally taking orders

themselves, it was stipulated that “their primary respon-

sibility is the promotion of drugs, not the actual sale of

them.”

Plaintiffs’ only interest in South Carolina is in its

relatively long statute of limitations (six years), and plain-

tiffs’ only contact with South Carolina is the bringing of

these lawsuits for the sole purpose of availing themselves

of that statute—the limitation periods having run in all

other states having any connection with the claims pre-

sented—F lorida, Indiana, New York, Connecticut, and Dela-

ware.

Process was served on Cooper Laboratories pursuant

to the procedures of South Carolina’s long-arm statute,

South Carolina Code of Laws 12-23.14, and upon Sterling’s

agent appointed for service of process in South Carolina

under 12-23.13.? The sufficiency of service is not questioned

here. However, “underlying the question of service of pro-

cess is the preliminary inquiry into whether the court has

the power to summon a defendant before it to adjudicate a

claim against him.” 4 Wright & Miller, Federal Practice

and Procedure 205 (1969).

Whether jurisdiction in the sense of power exists de-

pends upon concepts of “fairness” and “convenience” and

not upon mere compiiance with procedural requirements

of notice, nor even corporate “presence’’ within the state.

International Shoe Co. v. Washington, 326 U. S. 310 (1945).

It is evident that the criteria by which we mark

the boundary line between those activities which justify

the subjection of a corporation to suit, and those which

do not, cannot be simply mechanical or quantitative.

The test is not merely, as has sometimes been sug-

*See Rule 4(e) Fed. R. Civ. P.

30 RaTLiFr, et al. PETITIONERS, v. STERLING Druc Co., INC., RESPONDENT

gested, whether the activity, which the corporation has

seen fit to procure through its agents in another state,

is a little more or a little less . .. Whether due process

is satisfied must depend rather upon the quality and

nature of the activity in relation to the fair and orderly

administration of the laws which it was the purpose

of the due process clause to insure. That clause does

not contemplate that a state may make binding a judg-

ment in personam against an individual or corporate

defendant with which the state has no contacts, ties, or

relations .. . 7d. at 319. °

South Carolina has extended its service of process laws

to the outer limits allowed by International Shoe. See

Shealy v. Challenger Manufacturing Co., 304 F. (2d) 102,

107 (4th Cir. 1962); Carolina Boat & Plastic Co. v. Glas-

coat Distrib-.cors, Inc., 249 S. C. 49, 152 S. E. (2d) 352

(1967). Our inquiry is therefore limited to a determination

of whether the facts in the instant case fall within those

notions of due process,* ze., fairness and convenience,

which would make it not unreasonable to require the de-

fendant corporations to litigate far from home. Are the

activities of the defendant drug companies extensive enough

2“Despite the rather obvious point that the fifth, rather than the

fourteenth, amendment should be the source of due process limitation

upon the exercise of federal court powers, it has generally been assumed

that the incorporation of state law to confer district court amenability

embraces state law as limited by federal restraints on the states them-

selves... .” Foster, Long-Arm Jurisdiction in Federal Courts, 1969 Wis.

L. Rev. 9, 38.

“The oft-repeated test is that first stated in Pulson v. American

Rolling Mill Co., 170 F. (2d) 193, 194 (1st Cir. 1948):

‘There are two parts to the question whether a foreign corpo-

ration can be held subject to suit within a state. The first is a

question of state law: has the state provided for bringing the

foreign corporation into its courts under the circumstances of the

case presented? There is nothing to compel a state to exercise juris-

diction over a foreign corporation unless it chooses to du so, and

the extent to which it so chooses is a matter for the law of the

state as made by its legislature. If the state has purported to

exercise jurisdiction over the foreign corporation, then the ques-

tion may arise whether such attempt violates the due process clause

or the interstate commerce clause of the federal constitution. U. S.

Const. art. 1, § 8, cl. 3; amend. 14. This is a federal question and,

of course, the state authorities are not controlling. But it is a ques-

tion which is not reached for decision until it is found that the

State statute is broad enough to assert jurisdiction over the de-

fendant in a particular situation.’” Jd. at 38-39, n. 112.

APPENDIX 31

in South Carolina to warrant in personam jurisdiction when

the plaintiffs are non-residents and the causes of action

arose outside the forum and were unconnected with the

defendant’s activities in South Carolina? The question has

been said to be one of amenability, Foster, Long-Arm

Jurisdiction in Federal Courts, 1969 Wis. L. Rev. 9, 11, and

the ultimate process one of balancing. Developmenis in the

Law of State-Court Jurisdiction, 73 Harv. L. Rev. 909, 924

(1960); see generally Wright & Miller, supra, at 261-2.

Expanding interstate commerce and the “transformation

of our national economy over the years” has tended to

expand jurisdiction, McGee v. International Life Insurance

Co., 355 U. S. 220, 222 (1957), but there are still limits.

But it is a mistake to assume that this trend her-

alds the eventual demise of all restrictions on the per-

sonal jurisdiction of state courts. ... Those restrictions

are more than a guarantee of immunity from incon-

venient or distant litigation. They are a consequence of

territorial limitations of the power of the respective

States. Hanson v. Denckla, 357 U. S. 235, 251 (1958).

Significant in the instant factual setting is the lack of

a “rational nexus” between the forum state and the relevant

facts surrounding the claims presented. Curtis Publishing

Co. v. Birdsong, 360 F. (2d) 344, 346 (5th Cir. 1966). See

also, Blount v. Peerless Chemicals (P.R.), Inc., 316 F. (2d)

695 (2d Cir. 1963); Elliott v. Edwards Engineering Corp.,

257 F. Supp. 537, 539 (D. Col. 1965). If “plaintiff’s injury

does not arise out of something done in the forum state,

then other contacts between the corporation and the state

must be fairly extensive before the burden of defending a

suit there may be imposed upon it without offending ‘tradi-

tional notions of fair play and substantial justice.’” F.

James, Civil Procedure 640 (1965). (Emphasis added.) See

Hanson v. Denckla, supra, at 251; Perkins v. Benquet Con-

solidated Mmming Ce., 342 U. S. 487 (1952); Volkswagen

Interamericana, S. A. v. Rohlsen, 360 F. (2d) 437 (1st Cir.

1966); von Mehren and Trautman, Jurisdiction to Adjudi-

cate: A Suggested Analysis, 79 Harv. L. Rev. 1121, 1137-38,

1142-44 (1966).

32 RATLIFF, et a/. PETITIONERS, v. STERLING DruG Co., INC., RESPONDENT

Here the activities of the defendant corporations in

South Carolina, although possibly sufficient to constitute

“presence’’*, are nonetheless minimal. Neither maintains an

office in South Carolina, and neither warehouses goods

there. With the exception of the samples and materials

used by Sterling’s detail men, neither has any real or per-

sonal property in the state. Nor does either maintain a

bank account in the state or advertise in directories there

(although advertisements do appear in national medical

journals which subsequently find their way into the state).

The presence of Sterling’s detail men in South Carolina

and the appointment of an agent for service of process in

accordance with South Carolina law does not, we think,

tip the seale for plaintiff Nichols. We think the application

to do business and the appointment of an agent for service

to fulfill a state law requirement is of no special weight

in the present context. Applying for the privilege of doing

husiness is one thing, but the actual exercise of that privi-

lege is quite another. See International Shoe Co. v. Wash-

ington, supra, at 319. The principles of due process require

a firmer foundation than mere compliance with state do-

mestization statutes.

In respect to the reniaining activities of both defend-

ants, and in particular the activities of Sterling’s detail

men, we subscribe to the position taken by the First Cir-

cuit in Seymour v. Parke, Davis & Co., 423 F. (2d) 584 (1st

Cir. 1970), a ease of remarkable similarity to the one before

us. In Seymour, a resident of Massachusetts purchased an

allegedly injury-producing drug manufactured by Parke,

Davis & Company, a Michigan corporation. None of the

events giving rise to the claims presented occurred in the

forum state, New Hampshire, where the plaintiff admitted

she brought suit because of the expiration of the statute

of limitations in Massachusetts. The district court dis-

missed the claim for lack of in personam jurisdiction.

Affirming, the court of appeals concluded:

If the plaintiff has some attachment to the forum,

or if the defendant has adopted the state as one of its

major places of business, we would have no question

of the right of the state to subject the defendant to suit

I aetna

: set a Slr ae A ce tre newton

APPENDIX 33

for unconnected causes of action. Nor would we even

if the forum were not a major center of defendant’s

business but were nevertheless a community into whose

business life the defendant had significantly entered

as determined by the quality, substantiality, continu-

ity, and systematic nature of its activities... . When,

however, defendant’s only activities consist of adver-

lising and employing salesmen to solicit orders, we

think that fairness will not permit a state to assume

jurisdiction. 423 F. (2d) at 587. (Emphasis added.)

Since neither defendant here was amenable to in per-

sonam jurisdiction in South Carolina, the motions to set

aside the service of process and to dismiss the complaint

should have been granted.

Because we hold the district court lacked jurisdiction,

we do not reach the defendant corporations’ second line

of defense—that South Carolina’s “door-closing” statute

(South Carolina Code of Laws 10-214) prevents these non-

resident plaintiffs from maintaining suits on causes of ac-

tion not arising within the state. Compare Arrowsmith v.

Umted Press International, 320 F. (2d) 219 (2d Cir. 1963),

with Szantay v. Beech Aircraft Corp., 349 F. (2d) 60 (4th

Cir. 1965), which additionally involved a domestic corporate

defendant.

REVERSED.